Why might you wish to convert all or some of your Traditional IRA to a Roth IRA?
1. The ability to recharacterize allows you 20/20 “hindsight”, effectively allowing you to “undo” conversions that were not advantageous. This allows you to protect against adverse market swings. At a later date recharacterized funds can be converted.
2. The 70 1/2 minimum distribution rule is suspended for Roth IRAs. This will allow additional tax free deferral.
3. Tax rates are expected to increase in the future. Higher future tax rates means that more tax will be paid on taxable IRA distributions than the tax that would be paid on a conversion at a lower rate.
4. Distributions to beneficiaries after your death are tax-free. The might be one of the better reasons for a Roth IRA conversion.
5. If you can afford to pay the income tax on the IRA with non IRA funds, you’ll benefit greatly from the Roth IRA because of the ability to enjoy greater tax-free yields. This is because of the ability to move funds from taxable to a tax-free asset class.