My Income Exceeded the Roth IRA Limit. How Do I Fix This? YQA 189-5

In this video we're answering the question "My Income Exceeded the Roth IRA Limit. How Do I Fix This?" The White Coat Investor wants to help you stop doing dumb things with your money, so in this video series we answer questions you have submitted.

A listener exceeded the income limit for his Roth IRA and now needs to recharacterize the contribution. If there's any chance you'll make more than the Roth IRA limit you should always use the backdoor Roth IRA. If you've made this mistake, this is how you fix it.

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[GenHornhead]

Finally, the exact information I wanted but couldn't find in the 10+ previous videos I watched! I encouraged my dad to contribute to a ROTH and found out shortly thereafter his income was too high. He is pulling out his contribution and earnings very soon. Sounds like he can contribute his principal (AND earnings?) into a traditional IRA and then do the ROTH conversion. Fortunately, he doesn't have any funds currently in the traditional IRA so should be easy to backdoor.

[tb]

Thanks for the great video. I contributed $7000 in Roth and had to get out ~$9500, which I think it is a little too much to pay tax for the $2500 gains when do the conversions. Are there any other options? Like converting $6000 to Roth, and the rest of $2500 to 401k? And what if later I found that I am actually eligible for the Roth IRA, can I retract such recharacterization? Thank you!

[williyuum]

If I had to do this fix and only contributed a portion of the limit. Could I still proceed to do a backdoor Roth IRA for the rest of the limit? So it would be re-characterize the already contributed from Roth IRA -> Traditional IRA -> Roth IRA. And then for the rest of the limit it would be Traditional IRA -> Roth IRA

[stephendownen]

I contributed $6K January this year into my Roth IRA and now I need to backdoor it because my income is too high. It was dollar cost averaged into a fidelity index fund but I am still at a loss of $423.69. Do I need to sell off some index funds at a loss to get a $6K cash balance to then recategorize it to a traditional IRA? Try to wait out a while longer till I'm in the green before recategorizing? Thank you, this content is so helpful!

[jfc]

Thanks for the video. I contributed $7500 to Roth for year 2023 in April 2024. A month after I filed the 2023 tax return, I realized our MAGI was over $218000, how do I fix the mistake?

[SwtBabiJulieeX]

So I maxed out my 2021 Roth IRA contributions, not knowing I was going to over contribute for 2021 due to getting a new job. I want to re-charactize the excess 2021 contributions from a Roth IRA --> Traditional IRA, but I am wondering... If money that goes into the Roth IRA is after-tax, and a Traditional IRA is tax-deferred, would I essentially be getting double taxed by going from Roth --> Traditional back to --> Roth?

[saipurush]

Thanks for the helpful video! I'm dealing with this exact situation, but have a question.
I contributed the $6500 max to my Roth IRA, however, my income exceeded the limit for 2023. With the help of your video, I went ahead and recharacterized the contributions to a Traditional IRA. I then did a Roth conversion of the Traditional IRA into a Roth IRA. However, there's $2.76 left in my Traditional IRA, I guess from accrued interest. Can I Roth convert this as well? Or does that exceed any limit given I already converted the $6500?

[CaKiteboarding]

Can I close a contributory ROTH IRA that I opened at Schwab 10 days ago for 2024 and put $8k in it and it made 10cents, lol. I want to close it and do a backdoor instead because I might go over the income limit. Can I do that instead of recharacterize?

[RajeshKrishnan]

Thanks for the video! Quick question, if I over contributed $500 to my 2020 Roth IRA limit, is it possible to ask the brokerage to re-classify the extra $500 as a 2021 contribution instead?

[ProgradeProductions]

About me:
I contributed the full $6, 000 to my Roth IRA in 2021. However, I made above the Roth IRA income limits.
I haven’t filed taxes for 2021 yet (got an extension)
I haven’t contributed to any IRAs for 2022 yet
I don’t have any other IRAs besides my 1 Roth IRA



Here’s my progress so far and questions:

I recharacterized the contribution + earnings = $6, 788 from the Roth IRA to a Traditional IRA.
I think I need to report the Roth recharacterization on Form 8606 as if it were a regular non-deductible traditional IRA contribution. --> Do I report the full $6, 788? If so, how?
Now, I want to do a Roth conversion: get the money from the Traditional IRA and put it back into the Roth IRA. Can I transfer the full $6, 788 back into the Roth IRA for 2021? Or can I only transfer over $6, 000 for 2021? When/where will this be reported?
Am I still able to do a separate backdoor Roth IRA for 2022?

[osmelmaestre]

After a recharacterization from a roth to the traditional if I want to transfer back to a roth for a backdoor what do I do with the earnings? Do I leave them in the traditional or convert them along with the 6.5k contribution?

[CGAZ]

So i could take my roth If I made to much that year and just move it to a traditional IRA and then back to a Roth? Is there a waiting period to do all this. Sounds crazy.

[debsandy]

what if your Roth has a loss after you contributed and before you re-characterize the contribution?

[matt]

Isn't there a 6% fee to recharacterize Roth IRA contributions as IRA contributions?