Last year, many investors got their first chance ever to participate in one of the most valuable retirement savings vehicles available: the Roth IRA. But if you took advantage of that opportunity by converting a traditional IRA or 401(k) account to a Roth, now might be the time to consider something you may never have thought you'd want to do -- putting that money right back where it was.

The Roth do-over opportunity
 In 2010, the tax laws removed the income limit on Roth IRA conversions. Because high-income individuals still can't make regular contributions to Roths, the conversion option gave them their first pathway into the Roth universe. Because they provide tax-free growth for retirement savings, Roths are especially valuable to taxpayers in high tax brackets.

But as I explained back in April, a big benefit of converting your IRA to a Roth is that you can recharacterize your conversion if things go awry. This offsets the downside of converting: You have to include the amount you convert in your taxable income and pay taxes on it. If the market goes down after you convert -- as has now happened for many who made the move to a Roth late in 2010 -- then you face the added insult of having to pay taxes on a higher amount than your Roth is currently worth.

Recharacterizing your Roth conversion lets you avoid that problem. In simplest terms, recharacterizing gives you a do-over as far as your Roth is concerned, letting you put your money back in the traditional IRA where it came from and pretending (for tax purposes) that nothing ever happened. Granted, you still have the losses from your investments, but at least you don't have to pay taxes on them.

But what if I never converted?
 Of course, you can't recharacterize a Roth conversion that you never actually did. But what you can do is consider doing a Roth conversion now. That way, you can take advantage of today's low stock prices, lowering your tax liability -- and still keep the door open to a potential recharacterization anytime before October 2012 if things get even worse for the markets.

In fact, if you play your cards right, you can even use some strategy with your converted money to invest with a potential recharacterization in mind. For instance:

  • If you like the prospects for high-risk stocks that face big obstacles right now, put them into a separate Roth account once you convert. For instance, Netflix (Nasdaq: NFLX) has plunged on fears that its pro-streaming, anti-DVD strategy will backfire and that rivals Amazon.com (Nasdaq: AMZN) on the streaming side and Coinstar (Nasdaq: CSTR) on the DVD side will end up fencing the company in. But if Netflix succeeds, its stock could jump quickly -- and in a Roth, those gains would be tax-free. Conversely, if it fails, you can then recharacterize and save yourself the taxes of converting. Similar opportunities exist for beaten-down bank stocks Bank of America (NYSE: BAC) and its potentially disastrous $5 fee on debit card customers.

  • You might also want to maximize the tax-shelter element of Roth IRAs while also giving yourself an out if things go wrong. With mortgage REITs Annaly Capital (NYSE: NLY) and Anworth Mortgage Asset (NYSE: ANH), shares have been volatile of late as investors try to figure out the potential ramifications of rate changes, Federal Reserve policies, and proposals to change or limit the advantages investors gain from their real estate investment trust structures. By putting them or a mortgage REIT ETF like Market Vectors Mortgage REIT (NYSE: MORT) in your Roth, you can reap tax-free dividends and still have the do-over option if they end up cratering.

Don't miss out
 Current tax law allows everyone to consider a Roth conversion at any time, so you can always consider whether the time is right for converting or recharacterizing a previous conversion. Although it won't make sense for some taxpayers to pay high current tax rates on converted funds, the specter of permanently higher tax rates in the future could make now the perfect time to lock in today's relatively low rates.

Once you have a Roth, you'll want the right stocks for it. Take a look at five stocks that The Motley Fool owns that we think would go well in your portfolio as well.