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Contributing to IRA - MAGI concerns
Posted on 1/1/15 at 9:16 am
Posted on 1/1/15 at 9:16 am
For the past few years I have been maxing out my IRA contribution on the first week of every year. However, there is a chance that this year I will run into the "phase out" range of MAGI or even go over. A couple of questions - (1) does the risk of contributing and having to claw back make it smarter to wait until December even though it will be less time in market, and (2) is there some way to reduce potential MAGI other than 401K contributions. Thanks guys.
Posted on 1/1/15 at 10:26 pm to Cold Cous Cous
Are you contributing to a traditional IRA or a Roth IRA?
If it's a Traditional... even if you exceed the limits, you can still make the contribution, and get the tax deferred growth, you just won't get a deduction. Down the road, you will actually have basis in your IRA.
If it's a Roth... you can always pull it out at the end of the year if you need to. You will owe tax on the earnings, if any.
Do you have access to a 401K plan at work, if so, you can up your contributions to that to lower MAGI. Other than that the only common way to reduce it is to contribute to an HSA plan if you are eligble to do so.
If it's a Traditional... even if you exceed the limits, you can still make the contribution, and get the tax deferred growth, you just won't get a deduction. Down the road, you will actually have basis in your IRA.
If it's a Roth... you can always pull it out at the end of the year if you need to. You will owe tax on the earnings, if any.
Do you have access to a 401K plan at work, if so, you can up your contributions to that to lower MAGI. Other than that the only common way to reduce it is to contribute to an HSA plan if you are eligble to do so.
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