The Value and Use of the IRA Recharacterization Option.

• Autores: David L. Stowe, Andy Fodor, John D. Stowe
• Localización: Financial analysts journal, ISSN-e 0015-198X, Vol. 69, Nº. 5, 2013, págs. 61-75
• Idioma: inglés
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• Resumen

  • The recharacterization option allows IRA owners who convert a traditional IRA into a Roth IRA to choose the better of Roth or traditional treatment (for tax purposes) after returns are known. The authors used option-pricing models to estimate the value of this option and examined strategies to maximize its value. Using a simulation that applies a simple recharacterization strategy over a long time horizon, the authors show its potential value in private wealth management.