The basics on Roth conversions and recharacterizations

A Roth conversion: When you take an IRA and convert it into a Roth, paying taxes today with the assumption that waiting to pay taxes in the future will mean higher tax rates.

Appeals to: People in a low tax bracket, people who believe tax rates are only going up, investors who are wealthy and would like the benefits of passing money to heirs in a Roth IRA.

A recharacterization: Essentially, taking back the conversion so that taxes aren't paid and the money returns to a traditional IRA.

Appeals to: People who unexpectedly fell into a lower tax bracket, meaning they paid higher taxes during their conversion than they would if they converted today, or people who converted assets to a Roth at a point when the market was a lot higher than it is today, meaning they owe tax calculated on that larger portfolio value.

The deadline: Oct. 17, 2011, to recharacterize a conversion that took place in 2010.