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I am a physician who after years in practice decided to re-train in another specialty. My earlier Keogh and later 401k were rolled over into an IRA. Needless to say my income plummeted as I went from practicing MD to resident in training. Can I take advantage of this window of time where I make $40K/year and where the market has plunged, and recharacterize my IRA as a Roth IRA... or will I be forced to recharacterize once again in 2 years when my income returns to 6 figures?
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You can recharacterize at any time you choose and once it has been done, can not be taxed further. It sounds like this year would be the best time for you to do so.

Agent
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Can I take advantage of this window of time where I make $40K/year and where the market has plunged, and recharacterize my IRA as a Roth IRA... or will I be forced to recharacterize once again in 2 years when my income returns to 6 figures?

As long as you meet the income requirements in the year you convert your traditional IRA to a Roth, you aren't required to change back just because your income increases in a future year. So it sounds like you do indeed have a window of opportunity here.

--Peter
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<<Can I take advantage of this window of time where I make $40K/year and where the market has plunged, and recharacterize my IRA as a Roth IRA... or will I be forced to recharacterize once again in 2 years when my income returns to 6 figures? >>

I'm having a little problem with your wording. You use the term "recharacterize", but I really think that you mean "convert".

You CONVERT from a traditional IRA to a Roth IRA.

You RECHARACTERIZE from a Roth IRA back to a traditional IRA.

So if you're talking about conversion from your traditional IRA to a new (or even an existing) Roth IRA, then you're right on the money, as was the advice that you received.

Each conversion stands on it's own. If you convert this year...all or some of your traditional IRA to your Roth IRA...it's a completely stand alone transaction. There is nothing that you'll be forced to do relative to any future conversions.

And, as you point out, you'll want to do it while your income is below the $100,000 modified AGI threashold allowing for the conversion.

TMF Taxes
Roy

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