What happens if I contribute too much to my Roth IRA?

Summary of the corrective actions you can take when you contribute too much money to your Roth IRA

#RothIRA #Roth #IRA

DISCLAIMER: This video is only helpful hints and education. It is not specific tax, legal or investment advice. Before considering acting on anything you see in this video, first consult with your tax, legal or investment advisor. While the information expressed in this video is believed to be accurate, neither Andy Panko, CFP®, RICP®, EA nor Tenon Financial LLC make any guarantees to its accuracy.

[erikroisland]

Thank you for addressing recharacterizing an excess contribution for 2021 as a regular contribution for 2022, that's the answer I was looking for!

[bzadvisors]

Thanks Andy!! U always make topics easy to digest. I’m studying for E.A. exam!

[tommiller]

Awesome video Andy. In my understanding of the last option, just paying the 6% fee on the contribution, the only tax document this would have would be a 1099r, is this sound correct? The 5329 doesn't apply here?

[BenFisch]

Option 1
- Simply take contributions and earnings out and pay ordinary income tax on and a penalty (if under 59.5) on earnings ONLY, not your contributions.

Option 2
- recharacterize or convert to traditional IRA. That contribution will be an after-tax contribution.

[vivianlieu]

Thank you for the video Andy! Quick question, so if I decided to withdraw my excess contribution (in my case I took a loss without any additional earnings from my excess contribution) when will I be getting a 1099-R form to report? Also while filing my taxes currently, would I report that I contributed excess or the updated contribution total after withdrawing the excess?

[straitjacketstudios]

If you file Married Jointly (MFJ) and you have an unexpected bump in income and find that your AGI is too high, do BOTH spouses have the retract from each of your ROTH?

[samanthajusino]

Great video/information. I am in the process of removing an excess contribution to my Roth and I received a W-4R and am somewhat unsure what to do. Do you have a video on this?

[keithparker]

I contributed more to my Roth IRA than earned income for many years. I am estimating that I will probably lose about
$15, 000 to $20, 0000 in excess contribution penalties.
Opening up a Roth IRA is going to be my worst
Financial mistake ever.

[RetirementPlanningEducation]

I started by saying I had a "quick one" I wanted to do with this video. This ended up being not nearly as quick as I thought it was going to be...sorry!

[lisar]

I have a Roth IRA and its a CD I make sure I put the whole amount of money in the 7 months that it matures I just turn 50 so I put $7, 000 now.

[garyor]

Excellent information Andy. Question, does the 5 year rule apply to the return of excess contributions? 2nd question, if I’m 72 can I do a recharacterization of an excess funds removal from my Roth IRA back into my Traditional IRA?

[freepaysthesoul]

Thank you so very much for making this video Andy. I am one of the folks you mentioned at 2:28 of video and went over the 144k for 2022. Is there a way that I can work with Fidelity to roll over roth ira contributions to business roth ira?

[straitjacketstudios]

Is it true that Secure Act 2.0 has removed the 10% penalty when withdrawing NIA funds?

[johnhock]

Thanks for this very informative video! The situation you describe beginning at the 11:00 mark describes my dilemma. I was not eligible to contribute for tax years 2019, 2020 and 2021, but only realized that was the case earlier this year. I have an extension so I do not have to file until October. I understand what you said about my 2021 contribution, so I will have to pay tax on my earnings. As for 2020 and 2019, do I have to file a separate 5329 for both years, or do I can I account for both years on a single 5329 form?

[wattsobx]

@9:22 do you have to amend your full return? I thought i was reading in the instructions that you can juts fill ou the form 5239, with a check. Is that true?

[madhavivyawahare]

When you just have to remove the contributions only and not the earnings. What code will you get on your 1099-R and will the full amount be taxed? I got a code J and Free Tax USA says that the whole amount is taxed at 34% (24% + 10% penalty) which is obviously wrong.

[wattsobx]

Great Video! Do you know if Vanguard calculates the NIAC for you so I would just put in my excess contributions (say its the limit) of 6k? I also have my roth dividends reinvest are those considered contributions? Thanks!

[arnoldvales]

Hello Andy, I'm over 50, married, (wife unemployed) and I make the max contribution to my employer's 401k plan, and another $7000 to a traditional IRA. Question - can I open a roth ira and contribute another $7000? Thanks in advance for your help.

[DanMcD]

I had a significant increase in earmings this year ('22) due to a promotion. I over contributed to my 401K by about 1500.00. Can i withdraw that and start a roth with it and then have a 401k and a roth at the same time going fwd ?

[iagoslucca]

Hey Andy - QQ. I had my custodian return my 2022 excess contribution + earnings back to me in January 2023 as I realized I wasn't eligible for the contribution. I get I have to pay taxes + penalty, but are these earnings going to get reported in my 2022 return or 2023 (since this is when the cash came back)? My custodian says the 1099-R will be mailed in January 2024 to reflect the return of contribution, which means this may get reported in my 2023 tax return (but it feels like this income should be in 2022).