Why does this matter? Well, you can still convert traditional IRA assets into a Roth IRA (that’s good news); however, if your conversion proves unfavorable, you can no longer undue that conversion post October 15, 2018. Prior to the tax reform package of 2017, if your Roth conversion proved financially unfavorable, you could recharacterize (read as undue) your conversion to avoid the adverse consequences of your actions.

What has this tax law change cost us? Here are some examples:

• Since converted assets must be included in your taxable income, tax planning your conversion has become more difficult because end of year unexpected income or deductions can alter/change what once appeared to be a tax savvy move earlier in the year;

• Also, if your converted assets suddenly lose value after your conversion, you still owe taxes on the converted value, not the new lower value (in essence, you will owe taxes on money that you no longer possess); and

• Finally, if your tax conversion levied more taxes than you could afford, you may even have to liquidate some tax-deferred assets to cover your new tax bill causing you to incur even more taxes and, possibly, penalties.

If your considering converting some or all of your traditional IRA assets to a Roth IRA, you need to be more careful now than ever! Consult with your tax professional and your financial advisor to help ensure your not wishing for a “recharacterization.”