There's also another thing you may need to consider before mid-October. If you converted your IRA to a Roth IRA last year, you have until Oct. 15 do what's called a recharacterization, which essentially lets you undo the conversion and get a do-over.
The Basics of Roth Conversions
A Roth conversion lets you take money from a regular IRA and move it into a Roth IRA. You'll pay tax on the converted amount, but in return, those investments will grow tax-free as long as they stay inside the account. Unlike regular IRAs, Roth withdrawals are usually free of tax as well.
But if you converted last year and have lost money in your account, you'll still need to pay tax on the higher amount you originally converted rather than on its current lower value.
That's where recharacterization can help you, because for tax purposes, recharacterizing will make all that tax liability disappear. Then, after waiting 30 days, you can convert that money back into a Roth if you want, and you'll only have to pay tax on the lower amount when you file your 2012 tax return.
Cutting Your Taxes
With the stock market setting new five-year highs, the odds are good that you've actually made money in your Roth. But even if that's the case, there may be another reason to recharacterize: if you're in a lower tax bracket.
Mechanically, your broker should take care of all the details of doing the recharacterization, so you shouldn't have too much hassle. Given the thousands in taxes that it could potentially save you, considering whether recharacterization make sense is well worth the effort.
Motley Fool contributor Dan Caplinger likes do-overs when he needs them. You can follow him on Twitter @DanCaplinger.