Friday, May 14, 2010

You can't time the markets

That's the old adage anyway. Despite that being drilled into my brain for years and years, I'm finding myself wondering whenever there is a sharp drop if that day might be one of the lowest points of 2010. Why?

Because I've decided to convert part of my traditional IRA into a Roth in 2010. Why? It has nothing to do with the income limit being lifted...our income has never been high enough to disqualify us from making a Roth conversion. It has nothing to do with being able to spread the tax over the next 2 years. I'm quite fine with paying the tax in 2010, since I don't anticipate tax rates being lower in 2011 and 2012.

But, we have set aside $5,000 for energy-efficient improvements (namely windows) to put in place in 2010. These improvements will qualify for a 30% tax credit. So I've decided to convert the amount of my traditional IRA into a Roth that would translate into a $1,500 tax bill. I won't be out of pocket anything, but I will get that IRA money into my preferred retirement vehicle.

Of course, I'd love to make the conversion on the absolutely lowest day for the stock market. That would mean more shares get thrown over to the Roth with full anticipation that the value will rise over time. So when is that day???

1 comment:

  1. I think it was yesterday. I hope, anyway!

    You're so right about being unable to time the market. If the "experts" can't do it (and for the most part, they can't), then no one can.

    "Old Trader" (someone I follow on Seeking Alpha) sold his shorts yesterday morning and Marco Anthony (someone else I follow there) said he has "Purchased the most shares at close that I have in a long time... Hope I'm right"

    Neither of them are dummies (it appears that experienced people can time the market to some degree) so if you want to take their actions as endorsements, might as well go ahead and do it ASAP.