Data & Research March 10, 2010

Tax Advisers Expect More than a Third of Clients to Convert to Roth

A Fidelity Investments study found 40% of investors working with tax advisers are now eligible for Roth IRA conversions, and more than a third (35%) are expected to complete a conversion by year-end.
Reported by

The survey of nearly 500 tax advisers found 43% of their clients would benefit from a Roth IRA conversion, given two-thirds (66%) of advisers also think income taxes will generally rise in the future, according to Fidelity. Most (88%) advisers also expect discussions with their clients about Roth IRA conversions will increase during the next six months.

Respondents said they start the conversation more than half (59%) of the time, and 57% of their clients are hearing about the opportunity for the first time. While interest levels are high (89%) after these conversations, advisers said their clients express some reservations about converting to a Roth IRA, with the biggest being the potential tax costs (see “Report Warns of Cost of Roth Conversion”).

According to the survey, half of tax adviser clients are planning to pay for a Roth IRA conversion from the account being converted. In addition, the majority (54%) plan to take advantage of the one-time opportunity this year to split the taxable income between their 2010 and 2011 tax filing years.

Of the 35% of clients who are expected to complete a conversion by year end, the majority (91%) have already started or completed the process. Nearly half (44%) of the conversions are $50,000 or more.

Among tax adviser clients who are likely to convert to a Roth IRA this year, half will be converting all eligible assets from accounts such as a Traditional IRA or 401(k) with a former employer.

Products March 10, 2010

Fidelity to Offer Seminar on Tax-Diversified Retirement Portfolios

To help educate investors about the potential benefits of building a tax-diversified retirement portfolio, Fidelity is launching a "Tax-Smart Investing" seminar.
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The seminar, which will be offered at Fidelity’s investor centers across the U.S., covers three primary principles:

  • choosing a savings strategy based on an assessment of current and anticipated future tax rates;
  • selecting the appropriate saving vehicles (e.g., IRA, Roth 401(k)) for the saving strategy, taking into account the different tax advantages those vehicles provide; and
  • matching investments with the appropriate vehicles, considering the tax treatments and expected rates of return that those investments may present.

In addition, Fidelity has published a new Viewpoints article that specifically addresses tax-efficient strategies for investors, regardless of whether they are saving for retirement or already retired. The article provides guidance on how to customize a tax strategy and addresses the question of when an investor should pay taxes on retirement assets.

The Seminar schedule is available at www.fidelity.com/taxcenter.

The article is available at www.fidelity.com/taxviews.

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