Recharacterization

DEFINITION of 'Recharacterization'

The treatment of a contribution as being made to another type of IRA instead of the IRA to which the contribution was initially made.

BREAKING DOWN 'Recharacterization'

For instance, an individual may make a participant contribution to a Traditional IRA but may later recharacterize the contribution to a Roth IRA.

Roth IRA conversions can be reversed by means of a recharacterization, however, this movement of assets must include earnings (or losses).

RELATED TERMS
  1. IRS Publication 590: Individual ...

    A document published by the Internal Revenue Service (IRS) that ...
  2. Ordering Rules

    The order in which Roth IRA assets are distributed. Assets are ...
  3. Spousal IRA

    A type of individual retirement account that allows a working ...
  4. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  5. IRA Rollover

    A transfer of funds from a retirement account into a Traditional ...
  6. Disclosure Statement

    1. A document explaining the rules of an IRA in plain, nontechnical ...
Related Articles
  1. Retirement

    How to Recharacterize to a Traditional IRA

    If the technicalities of recharacterizing a Roth IRA to a traditional IRA seem dauntingly complex, here are a few simple tips to guide you through the process.
  2. Retirement

    Tips On How To Use IRAs To Boost Retirement Savings

    According to the Trustees of the Social Security Fund, the fund will be depleted by 2037. Are you ready?
  3. Taxes

    An Introduction to Roth IRAs

    Be sure to consider the tax benefits and the eligibility requirements of the Roth IRA.
  4. Retirement

    Roth IRA Contribution Rules: The Basics

    What you need to know about Roth IRA contributions – from eligibility to dollar limits, deadlines to tax breaks.
  5. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  6. Taxes

    How To Correct Ineligible (Excess) IRA Contributions

    Eager to save for retirement? Learn how to avoid overpayment penalties.
  7. Retirement

    Traditional IRAs: Contributions

    By Denise ApplebyFunding an IRA A Traditional IRA can be funded by several sources and means: Regular IRA contributions Spousal IRA contributions Transfers Rollover contributions Regular IRA ...
  8. Retirement

    How IRS Form 5498 Helps You

    If you have an IRA, you'll be getting this form. Here's the useful information it contains.
  9. Retirement

    6 Reasons Not to Recharacterize Your Roth IRA

    If you're thinking of recharacterizing your Roth IRA into a traditional IRA account, here are six compelling reasons why you should reconsider.
  10. Taxes

    Retirement Plan Tax Form 8606: When To File

    If you have a Roth IRA, you are responsible for keeping track of your pretax versus after-tax assets.
RELATED FAQS
  1. Can an individual contribute to both a Roth IRA and a Traditional IRA in the same ...

    Yes, an individual can contribute to both a Roth IRA and a Traditional IRA in the same year. The total contribution into ... Read Answer >>
  2. My spouse has little/no income. Can I contribute to my spouse's IRA?

    Yes. You may make a Traditional IRA contribution to your spouse's Traditional IRA because you have eligible compensation.There ... Read Answer >>
  3. Can I still contribute to my Roth IRA if my spouse earns over the requirement cap?

    My spouse makes over the amount allowed to contribute to a Roth IRA. However, I do not. Is it possible... Read Answer >>
  4. Can I contribute to both a SEP IRA and a regular IRA?

  5. How can I fund A Roth IRA if my income is too high to make direct contributions?

    Roth IRAs are not available to you if you are a high income earner - unless you use the following strategy. Read Answer >>
  6. What is the difference between a ROTH, SEP and Traditional IRA?

    The Roth IRA was established in 1996 as the newest addition to the individual retirement accounts (IRAs) available to individuals. ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center