I went to Roth conversion seminar tonight. He said that if you convert now, you have until 10/15/11 to revert back to a standard IRA if it turns out to be disadvantageous. That seems awfully generous; it is really true?
Yes. See Publication 590 and Form 8606. There's no specific mention of 2010 in the current versions, but the "recharacterization" deadline isn't different for 2010.
But beware if you have other investments in your Roth IRA; you are not allowed to cherry-pick and only recharacterize the ones that lost money.
However if you are careful to keep your conversion and recharacterization segregated, then you can indeed recharacterize the entire conversion. Preparing the amended return is not a job for DIY, in my opinion.
You most certainly ARE allowed to cherry pick IF you're smart and make it a point to set up multiple different Roths when you convert from a regular IRA.
For example, let's say I convert $100K from a traditional to a Roth and I set up FIVE different Roth Accounts, each with $20K. In Roth #1 I only buy Bonds, in #2 I only buy Large Cap, in #3 I only by Small Cap, in #4 I only buy Internationals and in #5 I only buy REITS.
When I check these accounts on October 1, 2010 I see that everything has gone UP except the Bonds. I can then recharacterize ONLY the Roth with the Bonds and VIOLA, I've complied with the law and beaten the system.
Why other advisors aren't aware of this is beyond me.
My apologies. It was NOT my intent to omit anything pertinent. I try to trim posts as much as much as possible to save bandwidth and keep things on point. Unfortunately, in my zealous attempt to be efficient I sometimes accidently trim a bit too much.
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