2015 was a volatile year in stocks with some decent highs but gut wrenching lows due, in no small part, to several free fall days in the market. However, there is a potential silver lining to this dark cloud in that it offers some an excellent opportunity to make an IRA conversion. This is due to the fact that transferring from a traditional IRA, which requires paying taxes when a distribution occurs, to a Roth IRA, which allows qualified distributions to be tax free, may allow tax savings depending on a person’s current and expected future tax bracket. In addition, a loss of value this year makes a rollover desirable since it will allow the portfolio to recover in the tax friendly confines of a Roth while taking a lower tax hit on the diminished value of the IRA in the year of the transfer. For those in a situation that might make a transfer appropriate, consult with your estate and financial planner to crunch the numbers on if this is the year to make a move or if standing pat remains the best option based on the anticipated tax bracket when IRA distributions will begin.
See Linda Kotis, Salvaging the 2015 Roller Coaster Ride With Your Retirement Accounts: Roth IRA Conversion, Wealth Strategies Journal, December 15, 2015.
