Hi community,
I would like to understand the best way to fix an overcontribution to a Roth IRA.
Scenario: say the excess is $1000 (out of 6k) which has now grown to $9k.
Is the best option to recharacterize the full Roth and then do a Roth conversion (with income tax due on the $3k capital gain) ?
Is it possible to only recharacterize the excess and convert bath to a Roth ? meaning tax is only due on the $500 from the $1k excess. I was also thinking that distributing the excess will result in less tax, but the benefit is more in the long run if full tax is paid on the full gain, since that excess will grow (fingers crossed) exponentially. Please suggest the lowest tax/best fix ?
Also I only have pre-tax contribution in traditional 401k, so I guess the pro-rata rule does not apply.
Cheers!
