Boomers Don’t See Advantage to Roth Conversion

A new survey finds more Baby Boomers are aware of their ability to convert individual retirement account (IRA) assets to a Roth IRA, but few intend to do so.

Specifically, the research commissioned by financial services company USAA found that of the Baby Boomers surveyed who own an IRA and can now convert to a Roth IRA due to the income limits lifting, more than half (58%) are aware of the change—a big increase over the 39% of respondents who were aware in 2009 (see “Most Baby Boomers Not Planning Roth Conversion“). However, 70% do not plan to make a conversion in 2010, and 17% are unsure.  

A release of the findings from USAA said 72% of all respondents who own an IRA are not planning to convert some or all of it to a Roth IRA this year, and 18% are unsure.

The top reason cited for not converting was believing their income tax rates will be lower in retirement and they do not want to pay higher taxes by converting funds now (44%). Thirty-five percent indicated they received a recommendation from a tax adviser or financial planner to not convert, and 27% said they are not able to pay the taxes that would be due on the converted funds.  

When asked what would help them reconsider their decision to not convert, survey respondents said having more information about the benefits of a Roth IRA (48%) and having a better understanding of how the conversion process works (46%). While having the funds to pay taxes on the converted funds doesn’t appear to be holding most people back from a conversion, more than one-third (39%) of respondents said that having the funds handy to pay the bill would help make the conversion decision easier, according to the survey data.