This news article originally appeared on WealthManagerWeb.com on 3/12/2010.
Tax advisors believe a Roth IRA conversion would benefit 43% of their clients this year, a big increase from 13% last year, according to a new study by Fidelity Investments. More than a third of clients eligible to take advantage of the recent removal of income limits on Roth IRA conversions are expected to complete a conversion in 2010, the survey of some 500 tax advisors found. Of conversions already started or completed, 44% are for $50,000 or more.
Advisors reported that although the vast majority of their clients are interested in converting to a Roth IRA, they also are concerned about potential tax costs. Fidelity said in a statement that it believes investors should generally avoid using proceeds from a Roth IRA conversion to pay the tax costs because that reduces the amount that can potentially grow federally tax free and could offset any tax savings gained by converting.