Ed Slott on Roth IRA conversions becoming permanent

Proposal would remove recharacterization option from advisers' toolkit

Nov 6, 2017 @ 12:17 pm

By Ed Slott and Greg Iacurci

Tax professionals are ringing alarm bells that a House proposal unveiled last week deserves financial advisers' attention. Should the measure become law, taxpayers who decided to convert a traditional, or pre-tax, individual retirement account to a Roth IRA, would no longer be allowed to elect to change it back to a traditional account within a certain time frame. And that means advisers should be checking in on clients about Roths before the start of 2018, said Ed Slott, founder of Ed Slott's Elite IRA Advisor Group in a conversation with InvestmentNews reporter Greg Iacurci.

(Click here to listen to podcast)

This recharacterization of a Roth IRA is a strategy widely used among financial planners, but lawmakers have targeted it as an example of taxpayers being able to game the system, Mr. Slott said.

(More: Tax reform: How the House bill changes rules for retirement savings)

He explains why advisers need to stay focused on where this tax provision lands, and recommends that they reach out to all clients who converted the accounts this year, just in case.

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