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|Subject: Aggressive Roth conversion||Date: 2/9/2013 4:06 PM|
|Author: Rayvt||Number: 71362 of 77078|
Suppose you want to convert $30K from an IRA to a Roth. Just enough to fill up to the top of your current tax bracket. Further suppose that the IRA is many times this amount, such as $100K.
Mush has been written about doing a conversion and then undoing it (recharacterize the conversion) if the market wend down and you are sitting on a loss in the ROTH.
But how about a more aggressive tactic?
Suppose you to make 2 conversions, 30K to roth#1 and 30K to roth#2, you invest differently in each roth, and then recharacterize whichever one did worst, even if both had a gain. You have to recharacterize one or the other, because you don't want to convert more than 30k.
Of course, you must do this in separate roths, because that's the only way you can keep the gains distinct.
Does this make sense? Is there any downside that I'm not seeing?
Consider something like this:
An IRA with $30K of BRK, $30K of FCNTX, $40K of SPY -- total $100k
Convert the BRK to roth#1
Convert the FCNTX to roth#2
Over the course of the year, BRK grows to $35K, FCNTX grows to $32K, SPY stays at $40K. Total $107k.
You then recharacterize the 32K in roth#2 back to the IRA. In essence, you have been able to convert whichever of the stocks that will do best, and all you have to do is some extra bookkeeping.
Make sense? Worthwhile doing?
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