<#-- Rebranding: Header Logo--> <#-- Rebranding: Footer Logo-->

Is it advantageous to convert a traditional IRA to a Roth IRA during a 50 percent market downturn?

If I have $20,000 in a Traditional IRA ($15,000 in contributions, $5,000 in gains), and the market plunges 50 percent, would I pay my income tax rate on $17,250 ($15K contributions + $2.5K gains) or $10,000 (current market value) if I choose to do a Roth conversion at that time? Is it advantageous to convert a Traditional IRA to a Roth IRA during a 50 percent market downturn?

IRAs, Taxes, Income Tax
Answers
Sort By:
Most Helpful
May 2018

YES!  You would only be taxed on the converted amount.  Market timing is perilous, however.  What if the market continues to fall another 20%, for example?  Until 1/1/2018 Roth conversions could be "recharacterized" if this happened.  That is, you could undo the conversion and then re-do it at the lower account value.  No more.

June 2018
May 2018
May 2018
June 2018