The rule makes those with income over $100,000 eligible to convert to a Roth.
According to a press release, of those surveyed who have a retirement savings account that could be converted to a Roth IRA, 44% said they are still undecided on the matter, although 85% of this group is at least 10 years away from retirement, and 47% expect their income to be more than $100,000 this year. The top reason for their indecisiveness, cited by 45% of respondents, is that they want to know more about Roth IRA conversions before making a decision.
Almost a third of respondents (30%) indicated they want to speak to a professional before making a decision, and of them, 76% want to talk to their tax adviser first.
An October survey for the First Command Financial Behaviors Index found 84% of middle-class consumers are not even aware that a new Roth conversion law goes into effect on January 1, lifting the $100,000 income limit and allowing investors to pay the resulting tax bill over a two-year period (see “Consumers Unaware of Roth Conversion Law Changes”). Even after being informed of the pending law change, only 6% of survey respondents indicated they plan to pursue a Roth IRA conversion.
TD AMERITRADE pointed out there are many indefinite variables—like future tax rates and the state of the economy—to think about before converting to a Roth IRA. Eighty-six percent of survey respondents think it is at least somewhat likely that their income tax rate could be higher when they reach retirement age, and 36% believe it is at least somewhat likely that the government could take steps to reduce the national debt by changing the tax-deferred status of retirement accounts such as 401(k) plans and IRA accounts.
Investors Want More Info before Roth Conversion
TD AMERITRADE said its recent survey found there is no mad dash by investors to convert retirement savings to a Roth IRA when a new rule becomes effective January 1.