Need advice on maximum IRA contributions - possible oops!

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summerof42
Posts: 104
Joined: Wed Nov 12, 2014 12:33 am

Need advice on maximum IRA contributions - possible oops!

Post by summerof42 » Sun Nov 10, 2019 2:54 pm

I recently made the 2019 maximum contribution in the amount of $7,000 to my Roth IRA with Vanguard. In the interim I also sent a check to an out of state / on-line credit union for purchase of an IRA CD in the amount of $3,000 due to the great rate. It just dawned on me last night I may have exceeded the maximum IRA contribution allowance. I'm 64 yrs young and thought I was ok given the catch up allowance given my age.

Now I'm in a panic mode. Do I call the credit union and have them cancel the IRA CD I just purchased and ask them to repurchase as a regular CD?

Thank you kindly in advance for your advice.

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Nate79
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Location: Delaware

Re: Need advice on maximum IRA contributions - possible oops!

Post by Nate79 » Sun Nov 10, 2019 3:16 pm

The maximum IRA contribution for 2019 is $6000 + $1000 if you are 50+.

Gill
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Re: Need advice on maximum IRA contributions - possible oops!

Post by Gill » Sun Nov 10, 2019 3:19 pm

Was is the check for the CD from your personal funds or from your IRA?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Topic Author
summerof42
Posts: 104
Joined: Wed Nov 12, 2014 12:33 am

Re: Need advice on maximum IRA contributions - possible oops!

Post by summerof42 » Sun Nov 10, 2019 3:24 pm

Check was from personal funds. Looks like I'll have to call the credit union and make a switch from CD IRA to just a CD.

retiredjg
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Re: Need advice on maximum IRA contributions - possible oops!

Post by retiredjg » Sun Nov 10, 2019 3:27 pm

You did exceed the limit, but this is nothing to panic about. The limit, including the catch up, is $7k for you in 2019. So you have an excess contribution of $3k.

You can take it out of either IRA - up to you. But do not just take out the money. That will look like an ordinary withdrawal.

You need to contact the custodian and get a return or withdrawal (I've seen both terms used) of a $3k excess contribution. You will specify what date you made the contribution on. They should calculate how much in earnings you get back too. If you get any back, those earnings are taxable with your 2019 income.

I suspect you can call the credit union and have them withdraw the excess contribution and also deposit it again in a regular CD.

Spirit Rider
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Re: Need advice on maximum IRA contributions - possible oops!

Post by Spirit Rider » Sun Nov 10, 2019 3:37 pm

With a Roth IRA you can simply withdraw the excess contribution as an ordinary distribution. On Form 5329, ordinary Roth IRA distributions reduce excess contributions.

retiredjg
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Re: Need advice on maximum IRA contributions - possible oops!

Post by retiredjg » Sun Nov 10, 2019 3:57 pm

What? :shock: :shock: :shock: :shock:

Even if you're right (and I don't doubt that), it just feels all wrong.

TropikThunder
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Re: Need advice on maximum IRA contributions - possible oops!

Post by TropikThunder » Sun Nov 10, 2019 8:52 pm

retiredjg wrote:
Sun Nov 10, 2019 3:57 pm
What? :shock: :shock: :shock: :shock:

Even if you're right (and I don't doubt that), it just feels all wrong.
No idea which post you’re referring to.

Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: Need advice on maximum IRA contributions - possible oops!

Post by Katietsu » Sun Nov 10, 2019 9:03 pm

No need to be in panic mode. You have months to sort this out. Read the previous advice. Decide what you want to do and make the request. Excess contributions for one reason or another is a common thing and they should have no trouble handling your request.

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