The following is in response to the article, Improving on Morningstar's Ratings: Moving Beyond Past Performance by C. Thomas Howard, PhD, which appeared last week.
Dear Editor,
This article was wonderful.
For some time now I have thought Morningstar was allowing their budget, income and mutual fund clients to direct their writing, research and publications. Recently their ETF articles have convinced me that this is correct. Keep up the articles that are out of the box. Advisors need to wake up and smell the roses.
Theodore J. Feight, CFP®
Creative Financial Design
Lansing, MI
The following is in response to the article, The New Roth Rules: Are Your Clients Converting? Survey Results – April/May 2010, by Michael Slemmer, which appeared last week.
Dear Editor,
There should be limited interest in Roth conversion, as it is not appropriate for the bulk of IRA holders.
If you have a very small IRA and you are no longer eligible to add (on a fully deductible basis) to it, it makes sense to convert and add to your new Roth.
If you are retired and confident in your other income sources, convinced you don't need you IRA assets and want to pay the tax bill so you can leave a Roth inheritance, then convert.
By the way, before you think you can afford to "gift" your IRA in the form of a Roth, be sure you have a well-designed plan for Long Term Care. We suspect this consideration alone is reason to question the viability of most Roth (for inheritance) conversions
All others who still think a Roth conversion makes sense really need to consider why they would pay a current (certain) tax on the full amount converted when, in all likelihood, they will withdrawal the funds down the road at lower tax rate, since it comes out in small increments, and it can be managed along with other income (municipal bonds, immediate annuities) sources, not to cause significant taxes.
Jeff Harring, CFP
Raymond James & Associates
St. Petersburg, FL
Michael Slemmer responds:
The main issue isn't that a Roth “is not appropriate for the bulk of IRA holders." In raw numbers of IRA-account holding investors, it's not and we'd agree (and these people simply invest in mutual funds). The main point is that the clients of RIAs generally are of a more sophisticated, wealthier status; and should be evaluated.
