People who converted traditional IRAs to Roths in 1998, the first year they were available, were given the option to spread the tax out over four years. You'll have a smaller tax bill if you convert just a quarter or one-half of your traditional IRA each year. David Bendix says the drawback to that is you don't have the full growing power of a Roth going in from day one. He suggests some careful tax planning to see if you have some capital losses that could offset the conversion tax bill. Despite the Roth benefit of tax-free income, fewer people are taking advantage of the Roth than expected when it was created in 1997.
Most experts say it's because investors want the tax break up front.
They're losing focus. They need an Adviser or someone to say this is a good idea. In fact, Corcoran says many investors are using the Roth as an estate-planning tool. If you leave a Roth to your heirs the money continues to grow tax-free. They have to withdraw the money only as quickly as you did.