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COPYRIGHT 2001 SourceMedia, Inc.
To Roth or not to Roth? That is still the question. After three years of Roth IRAs, the decision whether to set up or convert to a Roth IRA or to stick with a traditional IRA remains very much in debate because of continuing developments.
First was the leeway that the Internal Revenue Service allowed for correcting mistakes in making the initial decision to "Roth or not" by allowing "recharacterization" of an account back to its original character -- whether traditional or Roth.
Next, came the drop in the financial markets that moved recharacterization of devalued accounts from a hypothetical exercise to a pursuit that can realize substantial refunds. Now, hot on the heels of Wall Street's bear run, comes Washington's phased-in tax-rate cuts, which will alter the mathematics of selecting a Roth IRA for many taxpayers.
And finally, as time and deadlines for re-characterization pass, the need continues for equitable relief from the IRS or elsewhere to allow Roth conversions to be re-characterized to a traditional IRA, even if a deadline has come and gone.
Tax-rate cuts and conversions
A reduction in the marginal tax rates under the pending tax package will generally tip the scales in favor of a Roth...
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