Letters to the Editor

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    To the Editors:

    Christine Fahlund’s article, “Should You Consider a Roth IRA Conversion in 2010?” [August 2006 AAII Journal] contains a completely unrealistic assumption in all of its scenarios: a steady 8% average return pre-retirement, and a steady 6% average return post-retirement. Had the article used real-world rates of return (for example, actual S&P percentage returns over a 30-year pre-retirement period, and actual S&P returns over a 30-year retirement), showing a “bad patch” early in the accumulation phase as well as late in it, and the same for the retirement/distribution phase, I believe the results would have been completely different and would lead to the opposite conclusion (i.e., conversion does not work in the real world). Many investors who chose to convert using the four-year averaging rules provided when conversions were first allowed in the late 1990s did so to their detriment, since they ended up paying taxes on investments that later lost a major portion of their value in the sharp market decline of March 2000 to December 2002. These investors paid taxes on value they subsequently lost, and in most cases, the taxes have never been recouped, because the losses were inside Roth IRA

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