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Author: JimTitus Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: Roth Conversion? Date: 1/4/1998 6:49 PM
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<<So the rules changed, but those rules were NOT applied retroactively. The changes were applied against future deposits.

Will the rules change for the Roth? IMHO, yes. The Congress giveth and the Congress taketh away. The Roth as it is now probably won't last long. But for those who use it today, the rules probably won't change for the account they establish today save the ability to make future contributions.>>

This is certainly the assumption that most people operate under. Now once in awhile, it turns out that a loophole leaves people with more tax savings than the act contemplated, and they might change the rules. Depreciation recapture comes to mind. But tax laws would lose their effectiveness at shaping social policy if people thought that Congress would rescind tax benefits granted to people who do what the Congress had intended.

A more likely scenario is the indirect repeal of the benefits of Roth conversion. For example, if the income tax is repealed before you retire, or if rates are reduced drastically, then you will lose some or all of the benefits of Roth conversion, and it will be too late to recoup the costs.

My IRA only has about $10,000 and is partly after-tax anyway==so I am willing to take the chance. But if I had a large IRA based on conversion from a 401k, I would probably hedge by only converting half the IRA to Roth. I would also dollar-cost average the portion that was in equities over a 4-6 month period to minimize the risk of converting at a market peak.

Jim
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