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Retirement Planning > Saving for Retirement

Fidelity Reports Growing Interest, and Investor Plans for Roth Conversions

By Janet Levaux

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A recent Fidelity Investment survey shows tax advisors believe some 43 percent of clients would benefit from a Roth IRA conversion, given that two-thirds (66 percent) of advisors also think income taxes will generally rise in the future.

Most (88 percent) advisors also expect discussions with their clients about Roth IRA conversions will increase during the next six months.

According to Fidelity, this interest mirrors fund company’s internal data that shows nearly 1,000 investors and advisors each day are using the Roth Conversion Evaluator, a tool that helps them consider whether a Roth IRA conversion may make sense for them.

“As this is a complex decision, it’s encouraging that investors are engaging financial services providers and tax advisors to develop an overall retirement plan and discuss the potential benefits of a Roth IRA conversion,” said Chris McDermott, senior vice president, investor education, retirement and financial planning, Fidelity Investments in a statement.

“Fidelity believes investors should consider a variety of tax strategies when saving for retirement, including a Roth IRA, which offers tax-free growth potential and withdrawals at retirement, if certain conditions are met,” he explained.

Fidelity’s recent study also finds that 40 percent of investors working with tax advisors are now eligible to take advantage of the recent removal of income limits for Roth IRA conversions, up from just 13 percent last year.

In addition, more than a third (35 percent) of these clients are expected to complete a conversion by year end. (The survey encompassed some 500 tax advisors.)

These findings correspond with Fidelity figures that show a surge in investor interest in Roth IRA conversion guidance in January.

After launching its Roth Conversion Evaluator last year, Fidelity is adding more educational resources to help the growing number of investors and advisors who are evaluating a Roth IRA conversion and considering tax-diversification strategies.

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