Watch out for unscrupulous Roth IRA conversion pitches
Posted on 27 January 2010
Permanent URL of this article: http://retirementrevised.com/money/watch-out-for-unscrupulous-roth-ira-conversion-pitches
Roth conversion buzz is heating up this year due to the change in federal law next year that lifts the household income limit for eligibility to convert traditional IRAs to Roth accounts. But Kathy Kristof reports at MoneyWatch.com that some financial services companies are using the Roth conversion opportunity to make unscrupulous pitches for other products.
Why unscrupulous? Kristof reports that insurance agents are marketing Roth conversions as a door-opener to sell high-cost insurance products like deferred annuities. These products are lucrative for the brokers who sell them, but they carry very high fees and usually don’t perform as well as low-cost mutual funds. Via CBS MoneyWatch.com.
January 27th, 2010 at 8:54 pm
Hi Mark,
It’s very irresponsible of you to caution folks about not taking advantage of a wonderful tax saving strategy because someone might try and sell them a higher cost product.
Try approching the strategy and it’s merrits first so as not to cloud a potential IRA converters judgement. Dont lead with caution for something that most likely wont happen.
Second lets assume for a moment some advisor does sell them a higher cost product, it still has the potential to save someone many more times over in taxes what they may pay in fees!
Your analogy reminds me of someone being out raged at the FDA approving a medication that will most likely save 500,000 lives and yet has a 1 in 500,000 chance of causing death.
January 27th, 2010 at 9:15 pm
D - I’ve written often and at length about the benefits (for some) of Roth conversion. See: http://retirementrevised.com/tag/roth-ira. At the same time, readers should know it’s not a slam dunk. And I don’t agree with the notion that a bad Roth conversion is better than no conversion at all.