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Message
Overcontributing on a ROTH IRA
Posted on 12/24/15 at 8:45 am
Posted on 12/24/15 at 8:45 am
Yes, I just noticed it looking at some tax documents.
Looks like we've(wife and I) made too much the last few years yet I was maxing it out. I see vanguard has a form I can fill out for this. No, the IRS has never contacted me about the 6% excise tax they charge annually when this happens if you let it slide before you remove money.
Looks like now I'll have to open a traditional IRA and leave what i have in the ROTH IRA after removing overcontributions. Bad part is I'm assuming i can only do 5,500 at the beginning of a traditional(correct me If i am wrong here) and not flip the whole amount removed from the ROTH. The traditional won't be deductible either because of my 401k at work. Anyone else have this problem before? I was under the MAGI for so long but the last few years I'm so used to maxing it out way before i ever do my taxes it went unnoticed.
This post was edited on 12/24/15 at 8:54 am
2
Posted on 12/24/15 at 9:42 am to Fat Bastard
Max the traditional, let it sit for a month'ish, backdoor it into a Roth, profit.
Posted on 12/24/15 at 9:59 am to Fat Bastard
Yeah, that sucks. It's something I'm thinking about lately, too.
Recently my father in law suggested that my wife and I start waiting until we get our tax forms before we make our contribution just to be safe. Basically make a lump deposit in the spring each year
Recently my father in law suggested that my wife and I start waiting until we get our tax forms before we make our contribution just to be safe. Basically make a lump deposit in the spring each year
Posted on 12/24/15 at 10:24 am to The Easter Bunny
This is what I generally do. Make one 5500$ deposit prior to tax day for the year before. Probably not the best way to dollar cost average.
Posted on 12/30/15 at 1:21 pm to TheWiz
quote:
Max the traditional, let it sit for a month'ish, backdoor it into a Roth, profit.
Do you have to let it sit for around a month or can it be done sooner than that?
Posted on 12/31/15 at 10:10 am to The Easter Bunny
quote:
Yeah, that sucks. It's something I'm thinking about lately, too.
Recently my father in law suggested that my wife and I start waiting until we get our tax forms before we make our contribution just to be safe. Basically make a lump deposit in the spring each year
ok, after double checking I got lucky. I thought i was over the last two years but just this tax year upcoming. We barely made it under last year by a couple hundred bucks. lol It doesn't get any closer than that. So no excise tax on 2014 filings. I withdrew my 5500 from the 2015 tax year upcoming and recharacterized it into a TRADITIONAL so we are all set!
Posted on 1/1/16 at 3:56 pm to Fat Bastard
I'm in that boat for the first time this year. I normally make a lump sum contribution to my Roth around April 15. I don't have a 401k but the wife is covered at her work. This year we made to much for me to contribute to a Roth and I don't want to open a traditional, but it looks like it's the only option. And of course the contributions to traditional won't be deductible.
Why on earth the government feels this is necessary is beyond ridiculous. It's my money and if I want to save for my retirement I should have the rights like anyone else. Nothing like penalizing people for earning a good living and paying lots of taxes...
Why on earth the government feels this is necessary is beyond ridiculous. It's my money and if I want to save for my retirement I should have the rights like anyone else. Nothing like penalizing people for earning a good living and paying lots of taxes...
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