Unexpectedly over roth limit this year..remove 2020 contributions?

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GeauxBR
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Joined: Mon Sep 12, 2011 10:53 pm
Location: Baton Rouge

Unexpectedly over roth limit this year..remove 2020 contributions?

Post by GeauxBR »

My Wife and I normally contribute to our roth ira's throughout the year. It's not evenly spread out over 12 months but more like a couple grand here and there. Well she is in the mortgage industry so this year has been a boon for us financially (she has doubled last year's income with Oct/Nov/Dec still to go) and together we will be over the income limit. We didn't expect this and have been contributing to the roths along the way this year.

Since we know we will be over, do we go ahead and pull the contributions now? We can move money to our hsa I suppose, we still have room in it for the year.

Thanks for any help
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FiveK
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Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by FiveK »

Perhaps recharacterize and then use the backdoor Roth process?
glavine16
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Joined: Thu Oct 15, 2020 8:58 pm

Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by glavine16 »

Yeah, that's what I was thinking, recharacterize and backdoor or they could convert the excess contributions to a Trad IRA. We had this happen last year.
Topic Author
GeauxBR
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Joined: Mon Sep 12, 2011 10:53 pm
Location: Baton Rouge

Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by GeauxBR »

Thanks for the replies. Should I finish maxing the Roth, then recharacterize the 6k all at once just to have fewer transactions?
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FiveK
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Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by FiveK »

GeauxBR wrote: Fri Oct 16, 2020 5:05 pm Thanks for the replies. Should I finish maxing the Roth, then recharacterize the 6k all at once just to have fewer transactions?
Completely up to you.

Do you currently have no pre-tax amounts in any traditional IRA (and thus will avoid pro-rata taxation of the converted amount if that remains true on 31-Dec)?
Topic Author
GeauxBR
Posts: 116
Joined: Mon Sep 12, 2011 10:53 pm
Location: Baton Rouge

Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by GeauxBR »

FiveK wrote: Fri Oct 16, 2020 5:16 pm Do you currently have no pre-tax amounts in any traditional IRA
No, not in a traditional. The only other investing we do is her 401k, my sep, and we've been putting some extra in the hsa (it's only 2 years old) to build it up a bit.
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Duckie
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Re: Unexpectedly over roth limit this year..remove 2020 contributions?

Post by Duckie »

:greedy
GeauxBR wrote:No, not in a traditional. The only other investing we do is her 401k, my sep, and we've been putting some extra in the hsa (it's only 2 years old) to build it up a bit.
If by "sep" you mean SEP IRA, that is a non-Roth IRA and you will be affected by the pro-rata rule if you recharacterize your Roth IRA contribution to a TIRA and then convert back to the Roth. You can do it, but it'll cost you.

This applies to all non-Roth IRAs (Traditional IRA, Rollover IRA, SEP IRA, and SIMPLE IRA).
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