Data & Research August 18, 2009

Most Baby Boomers Not Planning Roth Conversion

A survey commissioned by financial services company USAA found that most Baby Boomers plan to keep their traditional individual retirement accounts (IRAs) intact.

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The majority (73%) of surveyed Baby Boomers who own an IRA don’t plan to convert their traditional IRA to a Roth IRA in 2010, which is when the household limit of $100,000 in modified adjusted gross income is scheduled to be lifted. Any investor who converts in 2010 can pay the tax bill over a two-year period, according to USAA.

For respondents who own an IRA and have a household income of $100,000 or more, only 9% are planning to convert in 2010. More than half (57%) are not aware that income limits on Roth IRA conversions are scheduled to be eliminated next year. Two-thirds (62%) are not aware that the converted funds are subject to tax.

“There may never be a better time than in 2010 to create a tax-free income stream for retirement,” said Terri Kallsen, senior vice president, USAA Wealth Management. Kallsen said that the combination of lower account values, historically low income-tax rates, conversion income limits lifting, and the ability to pay the tax bill over two years provides a rare opportunity to increase retirement income.

Some respondents are leaning more toward Roth conversion than others. Investors with both a traditional and Roth IRA are three times more likely (15% versus 5%) to plan on converting than those who own a traditional IRA only.
 
Younger Boomers (ages 45 to 54) are more likely than older Boomers (aged 55 to 64) to say they plan to convert their traditional IRA to a Roth IRA next year (11% versus 5%), according to the survey. However, older Boomers are more aware of the income limit changes than younger Boomers (41% versus 26%).

USAA said most (67%) IRA owners surveyed aren’t aware that any taxes would be due on converted funds. Of the one-third (33%) who are aware taxes would be due, one in 10 (11%) didn’t realize they would have the ability to spread the tax bill over two years.

Opinion Research Corporation conducted the telephone survey in late June and July among a national sample of 1,259 adults between 45 and 64 years of age, of which 599 own a traditional or Roth IRA.

Diversions August 18, 2009

Class of 2013 Has a Different Mindset

They say that history repeats—and that those who do not learn from the past are destined (doomed?) to repeat it.

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That said, if the entering college class of 2013 had been more alert back in 1991 (when most of them were born) they would now be experiencing a severe case of déjà vu. The headlines that year railed about government interventions, bailouts, bad loans, unemployment, and greater regulation of the finance industry. The Tonight Show changed hosts for the first time in decades and we were still dealing with the aftermath of a war in/with Iraq. 

According to the Beloit College Mindset List, Carter and Reagan are as distant to members of the class of 2013 as Truman and Eisenhower were to their parents—and tattoos, once thought “lower class,” are, to them, quite chic. Everybody knows the news before the evening news comes on. 

For these students:

  • Martha Graham, Pan American Airways, Michael Landon, Dr. Seuss, Miles Davis, Gene Roddenberry, and Freddie Mercury have always been dead.
  • Dan Rostenkowski, Jack Kevorkian, and Mike Tyson have always been felons.
  • The Green Giant has always been Shrek, not the big guy picking vegetables.
  • They have never used a card catalog to find a book.
  • Margaret Thatcher has always been a former prime minister.
  • They have been preparing for the arrival of HDTV all their lives.
  • Chocolate chip cookie dough ice cream has always been a flavor choice.
  • Someone has always been building something taller than the Willis (née Sears) Tower in Chicago.
  • The KGB has never officially existed.
  • Text has always been hyper.
  • Babies have always had a Social Security Number.
  • They have never had to “shake down” an oral thermometer.
  • The European Union has always existed.
  • Condoms have always been advertised on television.
  • Cable television systems have always offered telephone service and vice versa.
  • The American health care system has always been in critical condition.
  • Bobby Cox has always managed the Atlanta Braves.
  • Desperate smokers have always been able to turn to Nicoderm skin patches.
  • There has always been a Cartoon Network.
  • They have always been able to read books on an electronic screen.
  • Belarus, Moldova, Ukraine, Uzbekistan, Armenia, Latvia, Georgia, Lithuania, and Estonia have always been independent nations.
  • There have always been flat-screen televisions.
  • Everyone has always known what the evening news was before the Evening News came on.
  • There has always been a Planet Hollywood.
  • Nobody has ever responded to: “Help, I’ve fallen and I can’t get up.”
  • There has always been blue Jell-O.

Each August since 1998, Beloit College has released the Beloit College Mindset List. It provides a look at the cultural touchstones that shape the lives of students entering college. It is the creation of Beloit’s Keefer Professor of the Humanities Tom McBride and Emeritus Public Affairs Director Ron Nief.   

The complete Beloit College Mindset List (as well as the listings from prior years) is available at www.beloit.edu/mindset/.

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