How to Undo Part of a Roth Conversion

You can recharacterize just a portion of your account so that you can keep some money in a Roth.

I read your How to Undo a Roth Conversion column , and I am considering this strategy. Can I recharacterize part of the Roth conversion, or do I need to undo the whole amount?

It is possible to undo just part of the conversion while keeping the rest of the money in the Roth. You have up to October 15, 2012, to undo a Roth conversion that was made in 2011 -- a process called recharacterization. Recharacterizing part of the money can be a good idea if your conversion would otherwise bump you up into a higher tax bracket or take you over the income limits for certain tax breaks or new taxes. For instance, the added amount could make you subject to the Medicare Part B and Part D high-income surcharge, which applies if your adjusted gross income (plus tax-exempt interest) is higher than $85,000 if you are single or $170,000 if you are married (see Medicare Premiums: Rules for Higher-Income Beneficiaries for more information). You could recharacterize just enough money in the account to drop you below those levels while keeping the rest of the money in the Roth IRA.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.