Anyone have any thoughts on doing a Roth conversion given the rule changes that begin at the beginning of next year?

Most of the arguments for and against are standard fare (see this article for example), and it obviously depends on your personal financial situation… but are there any interesting or novel angles that have flavored your opinion on the matter?

The more novel things that I can think of…

  • Doing a conversion now, you fund current government spending. As they say, don’t encourage the politicians if you can help it…
  • It is generally better to avoid or postpone taxes as long as possible…
  • It is always possible that the government will change the rules later on. I only foresee this happening if the world (as we know it) is about to end, but something that should at least be acknowledged…

Those who argue that we will definitely see higher taxes in the future would be wise to think about that third point… if higher taxes are such a certainty, maybe you should also factor in a higher probability of the rules changing…

And something to think about from an investor and trader’s perspective… if conversions are popular enough it will definitely skew the gov’t tax revenues and allow for more manipulation of the information and reporting on the federal deficit. In the 90s the Clinton administration was able to claim a budget surplus thanks to the re-characterization rules being introduced… how will the politicians misuse the opportunity this time? It will certainly be fodder for the political pundits, as well as the blindly bullish market commentators.