I converted my traditional IRA to a Roth last year, and my investments have lost money since I made the conversion. Is it too late to change back?
It’s not too late, and losing money in your Roth IRA can be a good reason to undo the conversion. You have until October 15, 2014, to undo a conversion you made in 2013 (a process called recharacterization). After you move the money from the Roth back into a traditional IRA, you can file an amended tax return and get back the money you paid in taxes on the conversion.
You can also reconvert any of the money to a Roth; if the value is still lower than it was when you originally converted to a Roth, you’ll eventually pay less money in taxes on the conversion when you file your 2014 taxes, if your tax rate remains the same. You must wait at least 30 days and until the beginning of the year following the year of the original conversion to reconvert the money to a Roth. Because you’re recharacterizing a 2013 conversion, you’ll need to wait just 30 days.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It can also make sense to undo a Roth conversion from 2013 if your income dropped significantly over the past year -- if, for example, you retired, were laid off or decided to stay home with the children. You can convert the money to a Roth again after 30 days and pay taxes on the conversion at the lower rate.
You may be able to undo the conversion -- or any portion of the conversion -- by calling your brokerage firm or mutual fund company or filling out a form. Be sure to do both sides of the calculation before undoing a Roth conversion; if your investments have lost value but your tax rate has gone up, then you may not come out ahead by recharacterizing. Or if your tax rate has gone down but your investments increased in value since you originally converted to the Roth, you may not see any benefit.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Lowe's Stock Is Falling After Earnings. Here's WhyLowe's stock is lower Tuesday as Wall Street weighs a beat-and-raise quarter against declining revenue. This is what you need to know.
-
It’s Not Too Late to Boost Retirement Savings for 2018retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
When You Can Expect to Receive Your Tax Refund
taxes The quickest way to receive your tax refund is to file electronically and have the money directly deposited into your bank account.
-
How a Move Can Change Your 529 Plan Tax Deduction
529 Plans The tax deduction you get for contributing to your state’s 529 plan can disappear if you move to another state.
-
Tap an IRA Tax-Free With an HSA Rollover
IRAs You can convert tax-deferred money in a traditional IRA into tax-free cash by rolling it over to a health savings account and using it to pay for medical bills.
