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Excess Roth IRA contributions - options for removing money?
My husband JUST found out he is getting a large bonus this year that will put his MAGI too high to contribute to his Roth IRA. We have already funded $4000 into it for the year. Since it needs to be taken out to avoid penalties, my question is: what are his options?
A tax person told me he HAD to remove it from the Roth account and put it into the core holding account of the brokerage firm. I then saw that there are no income limits on a traditional IRA, so I'm wondering if it's better to convert his Roth to a Traditional IRA or if that's a no-no. If there was interest earned on the $4k that he contributed this year (unlikely given the current market, ha ha!), would that interest need to be moved to the core holding account so that he's not overfunding a traditional IRA? Maybe we should let it all become a traditional IRA and then add to the balance to get it to the $6000 cap? My last question is if he has to REMOVE the money, as opposed to converting the money from Roth to Traditional, is moving it to the core account good enough for the feds, or do I need to have the brokerage account literally send him a check for the money he contributed for the current year? We live in California, although I think it doesn't matter for this question...
My other question is a no-brainer I think: I don't work, and I've contributed to a spousal Traditional IRA all year. Since there are no income limits and it's only been a Traditional IRA that I've funded, I don't need to do anything for my account, correct?
Thank you!