OK to Do Roth Conversion And Recharacterization?
In Jan. 2009 I Roth converted $7,200. from my TIRA #1.
In Feb. and Mar. 2009 I recharacterized to TIRA #1 a $3,300. Roth conversion made on 10/10/08 from my TIRA #2.
Now I would like to Roth convert $6,000. of bonds from TIRA #1 and to do so as soon as possible. Immediately following this conversion, I want to recharacterize the Jan. Roth conversion of $7,200. back to TIRA #1.
Please advise if there are any problems with my taking these 2 actions. Your comments or suggestions will be appreciated.
Permalink Submitted by Alan Spross on Mon, 2009-06-01 00:22
You are eligible to do the 6,000 conversion now. It is not a disallowed reconversion since 31 days have passed since your March recharacterization.
Why do you want to recharacterize the January conversion so soon? If the Roth account overall has gained since January, it will result in more money going back to the TIRA than the 7,200. While you can do this recharacterization if you wish, it may limit your ability to do any further reconversions in 2009 or put you in a position of having to provide documentation to the IRS that the next conversion is not coming from the same funds that you are planning to recharacterize.
Permalink Submitted by fairira on Mon, 2009-06-01 15:33
Alan, thank you for your response. You raised several good questions.
In fact my Roth IRA account has decreased about 6% since the Jan. 2009 conversion. I believe that the $6,000. bonds conversion will produce more growth in the Roth IRA than the $7,200. conversion would and I expect some of that bonds growth to occur very soon.
Since I cannot keep both conversions without increasing my marginal tax rate from 15% to 25%, I am sure I will not want to do any further conversion later in 2009.
Thanks again.