‍The Old Rule vs. Today’s Rule

Before 2018, you could “recharacterize” a Roth conversion — essentially undoing it if your tax bill was higher than expected or if the market dropped right after you converted. That’s no longer allowed. The Tax Cuts and Jobs Act (2017) eliminated the option to reverse a Roth conversion.

Important Note: While conversions can no longer be recharacterized, contributions can. For example, if you make a Roth IRA contribution and later decide you’d rather have it in a traditional IRA (or vice versa), you can still recharacterize a contribution.

How to Approach a Conversion

• Time the conversions in years when your income is lower.
  

• Consider timing conversions in smaller chunks over several years to manage your tax bracket — work with a tax professional to fill up your existing tax bucket without spilling over into the next.
  
  
• Spread conversions periodically throughout the year to take advantage of market fluctuations — this creates a reverse dollar-cost averaging effect, smoothing out the impact of market ups and downs.

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