Instead of converting your entire IRA to a Roth IRA, you can pick and choose which securities to convert, selecting stocks for maximum potential growth and limiting the tax cost to the amount you are willing to pay. You can pick the time to convert specific investments.
Suppose your IRA holds large amounts of depressed technology stocks, bought a few years ago at much higher prices. You can have your broker transfer those stocks from your IRA to a Roth IRA, using a trustee-to-trustee transfer.
At today’s stock prices, the tax cost of transferring those shares may be modest, yet future appreciation can be tax-free within the Roth IRA, as long as you keep the stocks (1) for at least five years and (2) until you’re older than 59 1/2.
If those stocks go down some more, you can reverse the conversion any time until October 15 of the following year and avoid paying the tax.
