Timing of Roth Conversions
Over the next few years, we plan to make multiple conversions from an IRA (all pre-tax money) to a Roth IRA.
1) Does it lower taxes to make the conversions on days when the market is relatively low or does only the yearend value matter? We plan to invest in the same index funds in the Roth.
2) Is there a reason to minimize the number of Roth conversions in a year? Ex., is there a need to have a separate Roth for each conversion?
3) Any other words of warning?
Permalink Submitted by Alan - IRA critic on Sat, 2018-04-07 02:29
You can no longer recharacterize a conversion, so there is no reason to convert into different Roth accounts. You can do as many conversions as you wish, the TIRA custodian will just add them all up and report them on a single 1099R per TIRA account. If you are going to convert existing holdings by transferring them to your Roth IRA, you could convert in the same week for each month of the year if you wanted to avoid the possibility of converting at a high point. But picking what is relatively low is not easy, because the market could be relatively low compared to it’s recent past, but still be high in relation to where it will be 6 months from now. Market timing typically does not work effectively. You win some and you lose some.