Make Your Clients' Holidays Bright With A Roth Ira Conversion

* Do not convert unless you can fund the tax liability with assets outside your IRA.

Using IRA assets to pay taxes and fees makes it difficult to come out ahead in the long run, research from Robert W. Baird & Co. shows.

“You need to get as much inside the Roth as possible to let it grow tax free,” Steffen said.

Also remember that if you are younger than age 59-1/2, you will pay an additional 10 percent penalty on top of the tax.

* Consider a partial conversion that “fills up” your current tax bracket.

Going just up to the limit of your current bracket will help to minimize your tax liability.

* Keep in mind you always have the option of a “do-over” in 2016 if the conversion decision looks less attractive later.

If you convert $50,000 in mutual fund assets to a Roth before the end of 2015, but by March 2016 the fund’s value falls to $40,000 - you might want a “recharacterization.”

The recharacterization period begins on the day of conversion and is open through the due date of your tax return for that year. But you can use extensions to push it to October 15th of the year following the year of conversion. (The rules on recharacterization are somewhat complex, so consult with your tax adviser.)