Recharecterizing a ROTH to a Traditional IRA

[Guest Michael Adamitis]

In 1998 I converted a $16,000 traditional IRA to a Roth IRA, and elected to spread the income over 4 years ($4,000 each year).

Can I, now in 2000, recharacterize the entire conversion back to a traditional IRA? Can I also reclaim the tax I paid on the conversion amount for both 1998/1999? If so how?

I am 31 years old, earn approx $60,0000 a year (gross) and contribute the full $2,000 each year to the Roth with no other investing. Is it worth me going back to a traditional IRA (I did not have losses in my Roth this year) to gain the present tax advantage or should I stick with the Roth?

[John G]

1998 conversions are history now. You can not change the 1998 situation. I am not sure why you would even want to change it back. You have a 20K now in your Roth if 16K was supplemented by 2k and 2k for the last two years, even if your investments have been flat. At 10% a year, that nestegg will grow to about $384K when you are 62 and will eventually come out tax free. That's a pretty good shelter.

You may want to look into other possible tax shelters beyond the Roth. For example, your employer may give you ESOP, 401k, 403b, etc.

A 60k salary at age 31 would indicate some kind of professional career. Investing at an early age is very smart and gives you more years of compounding. Time is indeed an investors #1 friend. Stay the course, keep the Roth. Good luck.