How Do You Undo A Roth Conversion?
A Roth conversion occurs when a person transfers money from a traditional IRA to a Roth IRA. This may occur when the person decides there will be a benefit to placing the retirement funds into a Roth IRA. Some advantages to the Roth IRA over the traditional IRA are that the Roth IRA does not require mandatory distribution of funds at a certain age, and the fact that one can take distributions without penalty for certain situations, like the purchase of a first home up to $10,000. Once the conversion is made, the disadvantage is that the individual must pay taxes on the money that was converted from the traditional IRA to the Roth IRA. If the individual places the funds into a market-based account for the Roth IRA, such as a mutual fund account, there is a chance the market may decline over the rest of the tax year. If this happens, the person still pays the taxes on the amount transferred, even though the Roth IRA account has declined in value.The options for the individual would be to
