Roth IRA Contributions

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

Roth IRA Contributions

Post by Ditchwitch » Wed Jan 10, 2018 1:21 pm

I have usually maxed out 401K with employer matching and then decided on a year by year basis whether there were funds to contribute to Roth IRAs. Consequently, funds in our Roth's at present only make up a few percent of our portfolio and we would like to increase that by contributing more from now until retirement (8-12 years). At max contributions that would give us an additional 150K to invest in those 2 accounts until retirement if I worked until full social security becomes available to me.

Here's the question....can I contribute Roth funds now, e.g. max contributions for 2017 and 2018 ($13K) and then withdraw part or all of the contribution say in September 2017 and then change my mind again in December about redepositing 2017 full contributions ($6500) and then in March 2019 again about redepositing 2018 full contributions ($6500)? It seems from reading up as long as earnings aren't withdrawn principal is always available to be moved in and out within the tax year for which contributions were made. If so it might lower the bar for funds to be available to be liquid for other purposes and I might be more inclined to have those funds work in the equity markets rather than sit on the side lines...
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

TG2
Posts: 192
Joined: Sat Nov 25, 2017 6:50 pm

Re: Roth IRA Contributions

Post by TG2 » Wed Jan 10, 2018 1:48 pm

Ditchwitch wrote:
Wed Jan 10, 2018 1:21 pm
I have usually maxed out 401K with employer matching and then decided on a year by year basis whether there were funds to contribute to Roth IRAs. Consequently, funds in our Roth's at present only make up a few percent of our portfolio and we would like to increase that by contributing more from now until retirement (8-12 years). At max contributions that would give us an additional 150K to invest in those 2 accounts until retirement if I worked until full social security becomes available to me.

Here's the question....can I contribute Roth funds now, e.g. max contributions for 2017 and 2018 ($13K) and then withdraw part or all of the contribution say in September 2017 and then change my mind again in December about redepositing 2017 full contributions ($6500) and then in March 2019 again about redepositing 2018 full contributions ($6500)? It seems from reading up as long as earnings aren't withdrawn principal is always available to be moved in and out within the tax year for which contributions were made. If so it might lower the bar for funds to be available to be liquid for other purposes and I might be more inclined to have those funds work in the equity markets rather than sit on the side lines...
My understanding is that Roth contributions can be reversed up until the due date of the return, but am not sure whether that includes extensions if you filed for one. If it is from a different tax year then you can once per year take the money out and put it back within 60 days, treating it as a rollover. If not returned within 60 days it is treated as a distribution. I think. Get confirmation. And keep good records. :happy

kaneohe
Posts: 4957
Joined: Mon Sep 22, 2008 12:38 pm

Re: Roth IRA Contributions

Post by kaneohe » Wed Jan 10, 2018 10:17 pm

TG2 wrote:
Wed Jan 10, 2018 1:48 pm
Ditchwitch wrote:
Wed Jan 10, 2018 1:21 pm
I have usually maxed out 401K with employer matching and then decided on a year by year basis whether there were funds to contribute to Roth IRAs. Consequently, funds in our Roth's at present only make up a few percent of our portfolio and we would like to increase that by contributing more from now until retirement (8-12 years). At max contributions that would give us an additional 150K to invest in those 2 accounts until retirement if I worked until full social security becomes available to me.

Here's the question....can I contribute Roth funds now, e.g. max contributions for 2017 and 2018 ($13K) and then withdraw part or all of the contribution say in September 2017 and then change my mind again in December about redepositing 2017 full contributions ($6500) and then in March 2019 again about redepositing 2018 full contributions ($6500)? It seems from reading up as long as earnings aren't withdrawn principal is always available to be moved in and out within the tax year for which contributions were made. If so it might lower the bar for funds to be available to be liquid for other purposes and I might be more inclined to have those funds work in the equity markets rather than sit on the side lines...
My understanding is that Roth contributions can be reversed up until the due date of the return, but am not sure whether that includes extensions if you filed for one. If it is from a different tax year then you can once per year take the money out and put it back within 60 days, treating it as a rollover. If not returned within 60 days it is treated as a distribution. I think. Get confirmation. And keep good records. :happy
I believe you can withdraw the "current" year contributions up until the due date of return (including extensions if you filed for one). However since you can only contribute up until due date of return (NOT including extensions), you could withdraw the 2017 contribution made now (Jan 2018) in Sept 2018 (you wrote 2017 but how could you withdraw a contribution you hadn't made yet) but you could not recontribute in Dec 2018 since the deadline for contributions was Apr 2018.

When you withdraw the contribution you must make clear to the broker that you are withdrawing the current yr contribution and also withdraw the earnings from that contributions which will be subject to taxes/ penalty.

Usually the 60 day rollover is more limiting than withdrawing the current yr contribution but if you use it, remember that it is more restricting than once a yr. It can be done once/12 mos. You could not do a 60 day rollover in March 2018 and another in Feb 2019 . It is once per yr but does not meet the once every 12 mos. limit.

"Withdrawals of contributions by due date. If you withdraw
contributions (including any net earnings on the contributions)
by the due date of your return for the year in
which you made the contribution, the contributions are
treated as if you never made them. If you have an extension
of time to file your return, you can withdraw the contributions
and earnings by the extended due date. The withdrawal
of contributions is tax free, but you must include
the earnings on the contributions in income for the year in
which you made the contributions." https://www.irs.gov/pub/irs-pdf/p590b.pdf

Post Reply