Correct. If you know for sure that you will be able to contribute a full $7,000 for 2021, you could also just leave the excess in and apply it as your 2021 contribution. However, it's safest to make the regular distribution between October 15, 2021 and December 31, 2021, determine your MAGI for 2021 in early 2022, then make a new contribution for 2021 if permitted. That way, if you ultimately find yourself ineligible to contribute for 2021 because your MAGI ends up being too high, you will not have missed the opportunity to avoid the 6% penalty for 2021.
