Recharacterization

AAA

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.

INVESTOPEDIA EXPLAINS '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. In-Service Withdrawal

    A withdrawal made from a qualified plan account before the holder ...
  2. Qualified Distribution

    Distributions made from a Roth IRA that are tax and penalty free. ...
  3. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  4. IRA Adoption Agreement And Plan ...

    A contract between the owner of an individual retirement account ...
  5. Ordering Rules

    The order in which Roth IRA assets are distributed. Assets are ...
  6. Roth IRA Conversion

    A reportable movement of assets from a Traditional, SEP or SIMPLE ...
RELATED FAQS
  1. I am rolling my 401(k) into an IRA. After a year, can I convert this amount to a ...

    There is no provision in the tax law that would allow anyone to convert taxable funds and treat it as a tax-free transaction, ... Read Full Answer >>
Related Articles
  1. Taxes

    Analyzing IRA And ESA Statements

    Learn how to read and verify 5498 and 5498-ESA reporting your retirement-account contributions.
  2. 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.
  3. Taxes

    Recharacterizing Your IRA Contribution Or Roth Conversion

    Learn why you might make such a transaction and find out how to calculate how it will affect you.
  4. Taxes

    5 Retirement Plan Moves To Make Before Year-End

    Make sure all your loose ends are tied with these simple reminders and tips for your plans.
  5. Taxes

    Common Questions About Retirement Plans

    We offer some solutions for the individual taxpayer as well as the small business owner.
  6. Retirement

    5 Secrets You Didn't Know About 401(k)s

    If your employer offers a 401(k), that should be your first stop for retirement savings – especially if your contributions are matched.
  7. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

    A breakdown of the do's and don'ts of trading options in a Roth IRA.
  8. Retirement

    Find An IRA Account With No Minimum Deposit

    Three ways to start saving for retirement with a Roth or traditional IRA, no matter how little you have to invest.
  9. Options & Futures

    5 Secrets You Didn't Know About Roth IRAs

    Between its generous tax benefits at retirement and no required minimum distributions, a Roth IRA is well worth considering if you're eligible to have one.
  10. Retirement

    5 Secrets You Didn't Know About Traditional IRAs

    A traditional IRA gives you a current-year tax benefit and future years of tax savings – minus the income restrictions that limit who can have a Roth IRA.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center