I Already Funded My Roth IRA But My Income Is Over the Limit!

I Already Funded My Roth IRA But My Income Is Over the Limit!

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[boltkane]

This happened to me last year. Thru Fidelity (they walked me thru the process) I had to "reharacterize" my Roth and turn it to traditional. Once the funds cleared the process then I was able to backdoor the funds back to Roth. The whole process took about a week.

[nikitakucherov]

Come on IRS allow Roth contributions regardless of income, make it simple and easy for citizens to invest, that way investors can take care of themselves at retirement instead of needing the govt to do so

[BrandonMinguez]

Great answer! I may run into this scenario as well and the annual contribution after you know your MAGI is a great way to avoid this issue,

[jonnylinford]

Awesome video!! I have one question:

Say you’re making $500/month contributions to your Roth IRA and have to undo those contributions BUT those $500/month investments have LOST value. What happens then?

[timfreebern]

Thanks for taking this question! It’s possible I’m going to run in this issue myself this year

[kowasumono]

Good information. Wish I found this video earlier. The year I decided to automatically contribute $500 was also the year I exceeded the limit.

[TheForexApostle]

Thank you for taking the time to answer this question and for stating your opinion about it.

[jimsalmon]

I had this happen a few years ago, and I just reclassified it as a Traditional IRA. I’m now in the process of doing Roth conversions to setup for backdoor Roths moving forward.

[great]

I really hope the backdoor roth stays around. Wife and I max out both each year.

[habbadabbado]

Bo! Great advice to do it at end of year. It’s a different mindset than putting monthly chips in the pot, which many do.

[leehyatt]

Hi, I filed a tax extension and now my $6000 contribution is worth less than that now. Do I withdraw the full $6000 and eat that loss or withdraw the Net Income Attributable (~$5700ish)?

[zw]

Sounds like with those people nearing the limit an idea to do is just put that money into a savings account and at the end of year you can see if that money can go directly to your ROTH or consider the back door ROTH

[tpbiii]

Unfortunately you did not really explain how to "unwind" the Roth IRA contribution. What are the steps. I placed $6000 into a Roth in May of 2022. The stock that I bought went down by 60%. BUT in 2022 my income was over the limit to contribute to a Roth. NOW WHAT? The money is half of what it was so how do I "unwind" that investment to do a back door Roth?

[benjaminjohnson]

That's what a taxable brokerage account is for. Make your Roth IRA contributions once the year is over and you know your modified adjusted gross income, during the 3 month window from January - April 15th.

[jasonramirez]

Would it hurt to do a ROTH conversion if the MAGI is close to the limits?

[pfmannion]

If you are close to the cutoff, why not just do a backdoor Roth either way? Then you are ok both above and below the contribution limit.

[BrianBlack]

Is it not true that this years roth contribution limits base off of last years AGI?

[danpass]

Couldn’t you also leave it alone and pay the penalty, a max of $360?
You just couldn’t contribute the next year, though couldn’t you again contribute in year 3 (and pay one-time penalty)?

Perhaps he takes out 2021 principal but puts it in this year at the discounted market prices.
The potential long-term gain on ‘buying low’ seems too good to squander over a $360.00 one-time hit (for 2022 tax year)

[andyw]

The fine (if you are caught) is actually very minimal by the way.

[klee]

What's the limit on backdoor contribution? $6K?