Resumen de The Value and Use of the IRA Recharacterization Option.

David L. Stowe, Andy Fodor, John D. Stowe

• 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.