December 22, 1997

Q. Should I roll my IRA over into a Roth? I am 66, retired, single with no children, and in a very low tax bracket. I am of course in a lower tax bracket now than when I made the IRA contributions. In a previous column, you wrote that the Roth is best for a person currently in a low-tax bracket, or in a no-tax situation. As a disadvantage, you said a person will pay more in taxes on a Roth if he or she is in a lower tax bracket in retirement than when the contributions were made. Both of these situations apply to me. The Roth seems attractive because I will not have to make compulsory withdrawals at 70 1/2, as I would with the traditional IRA. What do you suggest?

P.S., Cambridge

A. I think it's a good idea to switch to the Roth, particularly since you'll be able to take advantage of the special rule for 1998 that allows people who convert a traditional IRA to a Roth to spread the tax liability over four years.

Besides the additional flexibility that the Roth provides when it comes to withdrawals, the real advantage of switching is this: Suppose you're in a 20 percent tax bracket and switch $10,000 from a traditional IRA to a Roth. Your tax liability would be $2,000 (spread over four years).

Then look five years down the road. If your Roth had increased in value at an average 8 percent during that period, it would have a value of $14,693, and if you were to withdraw at that point, your tax liability would have increased to $2,938.