Confused about over contributing to Roth after backdoor

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Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Confused about over contributing to Roth after backdoor

Post by sgadlin » Sun Jul 26, 2015 7:10 am

Hello everyone,

I am in need of some help, and can not figure this out. My wife and I are both beginning our careers as physicians, starting our new jobs earlier this month. I have taken control over our finances, and fired our financial adviser. I put $5,500 in a traditional IRA and then rolled it over to Roth IRA ("backdoor"), for myself. I did not realize that in January our adviser forgot to turn off our automated Roth IRA contribution, so we each contributed $500 in January. I am not sure exactly what to do. I have read
http://fairmark.com/retirement/roth-acc ... roth-iras/


but still very confused, because of the back door roth. It seems that I have to figure out how much the $500 in January generated as well. I have no idea ow to do this, and we transferred out Roths from Americanfunds to vanguard, to further confuse me on how to find this out.
Thanks for any advice
Also would it be ok to do only $5000 for my wife, or do we need to rectify the $500 January contribution first?

JW-Retired
Posts: 7154
Joined: Sun Dec 16, 2007 12:25 pm

Re: Confused about over contributing to Roth after backdoor

Post by JW-Retired » Sun Jul 26, 2015 11:50 am

I would call up Vanguard, where the funds are now, and tell them you made a $500 Roth contribution in January, but you realize you will make too much money to make a (direct) Roth contribution so how can you undo that contribution. I have done this and they just took the contribution amount + its earnings out of the Roth and put it one of my taxable account funds. I think just sending the money back was also an option. You then get a 1099 for the earnings for taxes next year.

I have no idea exactly how the account move from Americanfunds to vanguard is going to complicate this, but I'm fairly optimistic that Vanguard will know what to do.
JW
ps: same thing for wife's contribution.
Retired at Last

clydewolf
Posts: 746
Joined: Tue Jul 21, 2015 12:51 pm

Re: Confused about over contributing to Roth after backdoor

Post by clydewolf » Sun Jul 26, 2015 1:03 pm

JW has told you what to do, talk with Vanguard and explain your situation.
You will need to do the same for your wife's $500 Roth contribution.

Vanguard will determine any gains from those January contributions. If you do that now, your $500 contribution may show a loss, sorry.

Your back door ROTH conversion is OK to leave as it is.

The transfer from American Funds would have no bearing on this excess contribution being undone.

Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Re: Confused about over contributing to Roth after backdoor

Post by sgadlin » Mon Jul 27, 2015 8:22 am

Thanks for the advice, I will give them a call today

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