It was an easy decision. For every one like Albagli, however, there are countless more still undecided. Banks and other financial companies say only a small percentage of eligible customers opted for a conversion thus far, although some report a pickup in activity as the year draws to a close. The advantage of converting before 1999 is a one-time tax break that allows the income tax owed on the conversion to be spread out over four years. Though it's not tax deductible, Roth's key benefit is that earnings grow tax-free and future distributions aren't taxed provided certain conditions are met.
Traditional IRAs are tax-deferred.
They may be deductible for some individuals, including folks like Albagli who aren't covered by an employer-sponsored retirement plan, or for those who meet income requirements. As the Dec. 31 deadline approaches, financial companies are making a last-ditch effort to convince investors to make the switch. Wells Fargo Bank of San Francisco, for instance, launched a public awareness campaign on Nov. 10, offering informational seminars in four Western states. That's just 0.6 percent of those eligible. Albagli is confident his account will grow substantially since most of the assets are invested in stocks or stock funds.