Roth IRA conversions surged last year, particularly in the fourth quarter as investors looked to take advantage of regulatory changes.

Bank of America reported that it executed more than 56,000 conversions for its clients last year, nearly 45,000 more than the total number of conversions in 2009.

Bank of America’s clients converted roughly $3.8 billion in assets to Roth IRAs last year.

In December, roughly 14,500 Roth IRA conversions were executed, representing 26% of the total conversions for the year.

The average Roth IRA conversion size for December was $94,000, the largest monthly average for all of last year. Eighty percent of December conversions occurred after Dec. 17, following the announcement that tax rates would remain flat.

Bank officials said that last’s year’s elimination of income limits on those who can convert drove the increase in conversions. Also, the continuation of current tax rates for the next two years, as well as the expectation of higher income taxes in the future helped increase the number of conversion.

Officials also said that with affluent and wealthier clients who are newly eligible to convert, it was not surprising to see the average size of a conversion increase to $68,000 last year, up from $22,000 in 2009, with many clients converting for estate planning purposes and as part of leaving an inheritance to their heirs.


Matt Ackermann writes for American Banker, a SourceMedia publication.Follow EBN on: Twitter | Facebook | LinkedIn | Podcasts

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