Working with his broker, Keebler, 49, hopes to convert during the market's next tumble, but he will carefully time his state tax payments so that they fall in the same tax year as his federal tax, to avoid triggering the alternative minimum tax the following year.
Seymour Goldberg: Goldberg, an attorney in his 70s also from Long Island, says he will make a partial conversion of assets if the market craters. That is because, as a retired college professor, he is getting nearly a 5% yield from a vintage TIAA-CREF retirement account. Converting to a Roth would mean removing assets from this thriving account, so he has to assess carefully.
Natalie Choate: An attorney with Nutter McLennen & Fish in Boston, Ms. Choate, 64, switched a low-six-figure amount to just one Roth account in early July. The move fulfills her frequent advice to convert as soon as possible in order to "start the five-year clock running." To take tax-free withdrawals of earnings from a Roth, the owner must usually be at least 59 1/2 and have held the account five years.
By converting during a market dip, Choate says she hopes she won't have to reverse the switch. So far her Roth account is up more than 5%, she says, but she dreads paying the conversion taxes, which she won't defer into 2011 and 2012. The thought of writing a five-figure check to Uncle Sam has kept her up at night.
Because she advises clients to write such checks, her dread has been "instructive," she says: "Next, I have to decide whether to convert more assets or remodel my kitchen. Right now, the kitchen is winning."
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