Thursday, May 20, 2010

The bright side of market weakness

We all know someone that looks at everything with the "glass half empty" mentality.  For those of you who can endulge your positive side, read on.  There's always a bright side to events happening around us- even investment market weakness as we're experiencing today. 

There are wealth planning strategies that can benefit from market weakness- one of them happens to be Roth IRA conversions.  When an account owner converts IRA assets to Roth IRA when the assets are trading at lower values there is a smaller amount of resulting tax and greater chance that corresponding market improvements will occur within a tax-free Roth IRA (after conversion).

Additionally, for those account owners that have previously converted to Roth IRA the weakness creates an opportunity to weight recharacterization opportunities (reversing a Roth IRA conversion) and subsequently "re-converting" after satisfying certain waiting periods required by the IRS.

We'll keep looking at the full half of the glass for our clients.