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Roth Income Limit- What if exceeded?
Posted on 2/15/19 at 6:40 pm
Posted on 2/15/19 at 6:40 pm
Salary-wise, household is just under the Roth income limit for 2019. But, one income gets unpredictable quarterly bonuses. At the end of the year, if the household income limit is exceeded and you have already contributed to the Roth, what happens?
4
Posted on 2/15/19 at 6:49 pm to deeprig9
Going through this now. Your brokerage firm will file a excess contribution form. They will handle. Needs to be removed before the tax deadline but not before you file taxes.
Funds need to be removed or you will receive a 6% penalty tax for this year and every year the funds are in excess. Not sure on the gains from your contributions since my excess was still in cash and not allocated elsewhere.
And the above is what I was told this week. Apologies if this is incorrect.
Funds need to be removed or you will receive a 6% penalty tax for this year and every year the funds are in excess. Not sure on the gains from your contributions since my excess was still in cash and not allocated elsewhere.
And the above is what I was told this week. Apologies if this is incorrect.
Posted on 2/15/19 at 6:54 pm to kciDAtaE
Could potentially recharacterize to a traditional ira as well assuming you qualify.
Posted on 2/15/19 at 7:00 pm to kciDAtaE
Which brokerage are you with and did you approach them with the issue or somehow they notified you?
Posted on 2/15/19 at 7:11 pm to FinleyStreet
quote:
Could potentially recharacterize to a traditional ira as well assuming you qualify.
Yes I can. That is an option. However, I just got to the point where I feel I need help managing my money. I have always taken the approach of reduce fees and taxes. And I’ll invest with my research.
I’m a bit over my head now and actively seeking an accountant to help move my money.
Paying an accountant goes against my philosophy, but it’s time. If I entertain the Backdoor, I want help.
Posted on 2/15/19 at 7:13 pm to deeprig9
quote:
Which brokerage are you with and did you approach them with the issue or somehow they notified you?
I’m with Fidelity and like their low fees. I brought this situation to them. They suggested I make sure I can’t lower my AGI and NOT have to withdraw excess funds from Roth.
I’m going down that path now.
ETA- I have done my taxes myself up to this point. I’m not over the limit, but I’m the range where I can’t contribute the full amount. That’s why I need help.
This post was edited on 2/15/19 at 7:15 pm
Posted on 2/15/19 at 7:39 pm to kciDAtaE
quote:
If I entertain the Backdoor, I want help.
The brokerage websites make this a 5 minute deal. You can even Google step by step screenshots on how to do it.
But I understand at a certain point even easy stuff becomes hard to get around to.
Posted on 2/15/19 at 7:43 pm to kciDAtaE
quote:
If I entertain the Backdoor, I want help.
Posted on 2/15/19 at 8:14 pm to Teddy Ruxpin
quote:
But I understand at a certain point even easy stuff becomes hard to get around to.
That’s where I’m at. I hate to pay $500-$1000 per year for help. But more afraid I’ll waste more than that.
Plus I look at the cost of my time spent. At a certain point, I could be earning money instead of trying to save money when you break down the personal strengths.
Posted on 2/15/19 at 8:30 pm to FinleyStreet
quote:
Could potentially recharacterize to a traditional ira as well assuming you qualify.
correct
Posted on 2/15/19 at 8:54 pm to deeprig9
Here is what I don't understand about a Roth and the income limit.
Someone may go into a year thinking that their AGI will exceed the limit. But you could lose your employment.
Can you not contribute to the Roth at the beginning of the year and then at the point in the year you finally exceed stop?
Someone may go into a year thinking that their AGI will exceed the limit. But you could lose your employment.
Can you not contribute to the Roth at the beginning of the year and then at the point in the year you finally exceed stop?
Posted on 2/15/19 at 9:39 pm to deeprig9
I just went through this. Recharacterize to traditional and convert back to Roth. You can call the company you have your Roth with and they should be able to walk you through it. Can all be done online.
Posted on 2/15/19 at 10:17 pm to kciDAtaE
quote:How would you lower your AGI now for 2018?
I’m with Fidelity and like their low fees. I brought this situation to them. They suggested I make sure I can’t lower my AGI and NOT have to withdraw excess funds from Roth.
Posted on 2/15/19 at 10:24 pm to Mr.Perfect
quote:you have over three months to "fix" things after the year is over. Really isn't a big deal.
Here is what I don't understand about a Roth and the income limit.
Someone may go into a year thinking that their AGI will exceed the limit. But you could lose your employment.
Can you not contribute to the Roth at the beginning of the year and then at the point in the year you finally exceed stop?
If you undefund during the calendar year, you have til April to add to it. If you overfund during the year, just recharacterize the excess.
Posted on 2/15/19 at 11:13 pm to castorinho
Yea that makes sense
Posted on 2/16/19 at 10:36 am to deeprig9
In the future, wait until you do your taxes and see what your AGI is. You have until April 15 to make a contribution (if eligible) and designate it for the prior year.
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