AGI in Roth phase out

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Topic Author
Bondman
Posts: 25
Joined: Sun May 08, 2016 6:06 pm

AGI in Roth phase out

Post by Bondman »

Hello,

New job for spouse will put us about halfway into the phaseout range for Roth IRA contributions. Our contributions are auto-set at what I think we will be eligible for. What if I put in too much? Can I withdraw contributions without penalty? Would it be better to wait to contribute until next year for 2017 so I know exactly how much we can contribute based on our income?
KlangFool
Posts: 31426
Joined: Sat Oct 11, 2008 12:35 pm

Re: AGI in Roth phase out

Post by KlangFool »

Bondman wrote:Hello,

New job for spouse will put us about halfway into the phaseout range for Roth IRA contributions. Our contributions are auto-set at what I think we will be eligible for. What if I put in too much? Can I withdraw contributions without penalty? Would it be better to wait to contribute until next year for 2017 so I know exactly how much we can contribute based on our income?
Bondman,

Could you increase you or your spouse's Trad, 401K contribution to reduce your AGI?

KlangFool
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Topic Author
Bondman
Posts: 25
Joined: Sun May 08, 2016 6:06 pm

Re: AGI in Roth phase out

Post by Bondman »

KlangFool wrote:
Bondman wrote:Hello,

Could you increase you or your spouse's Trad, 401K contribution to reduce your AGI?

KlangFool
Unfortunately, our expected AGI is right in the middle of the Roth phase out AFTER maximizing both of our $18,000 401(k) deferral.
livesoft
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Joined: Thu Mar 01, 2007 7:00 pm

Re: AGI in Roth phase out

Post by livesoft »

It would be better to wait.
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House Blend
Posts: 4877
Joined: Fri May 04, 2007 1:02 pm

Re: AGI in Roth phase out

Post by House Blend »

If you have no traditional IRA, you should instead consider setting up a backdoor Roth IRA.

Same consideration applies independently to spouse, who might or might not have a traditional IRA.
https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
Rupert
Posts: 4122
Joined: Fri Aug 17, 2012 12:01 pm

Re: AGI in Roth phase out

Post by Rupert »

Just wait and make your 2017 Roth contributions in 2018, after you've prepared your tax returns for 2017. You can back the money out without penalty if you over-contribute, but it's just easier to wait.
ThreeBears
Posts: 169
Joined: Mon Nov 28, 2016 10:13 am

Re: AGI in Roth phase out

Post by ThreeBears »

Rupert wrote:Just wait and make your 2017 Roth contributions in 2018, after you've prepared your tax returns for 2017. You can back the money out without penalty if you over-contribute, but it's just easier to wait.
This is true. If at the end of the year you realize you put too much money into your ROTH IRA, you can ask your broker to take the money out. You will then have to pay income tax on the profits associated with the "excess funds" that you had entered into your ROTH.

1) Personally, I would research back-door Roths.
2) If backdoor doesn't work (for reasons such as having a large traditional IRA), then I would wait to enter money in the ROTH until you do taxes for the years.

FWIW - I have this problem this year (getting phased out of Roth). I have been waiting a week already to get my money back from my broker. I was warned that they are very busy and I may have to wait AT LEAST two weeks . . . so I still haven't been able to submit my taxes.
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retiredjg
Posts: 53989
Joined: Thu Jan 10, 2008 11:56 am

Re: AGI in Roth phase out

Post by retiredjg »

If you are willing to use the back door, just go ahead and do it now whether you need it or not. This eliminates the problem of having to wait till you know your exact numbers. It also keeps both steps of the back door on the same Form 8606. Many people like this because it is less confusing because you don't document step one in one tax year and step two in the next tax year.

Suggest you download and pencil through a Form 8606 and see if you can make it work right. If not, don't do the back door until you get the paperwork figured out.
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