A strategy for splitting investments into separate Roth conversions gives advisors a way to take advantage of 20/20 hindsight.
Roths have gained in popularity since 2010, when the income limits on Roth conversions were lifted. As a result, the ability to recharacterize or undo a conversion is increasingly being used proactively. To take advantage, advisors help clients convert traditional IRAs into Roth IRAs, then wait to see what happens with the investment. If its up, the conversion stays and if its down, the account gets recharacterized, available for a future conversion (at a lower tax cost).
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