The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: gsd802 on January 01, 2025, 04:55:49 PM
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Hello and Happy New Year!
I always contribute the max amount into my ROTH the first week of each year.
I am "single" and understand I can only contribute $7,000 as long as my MAGI is under $150,000. I believe this number is relatively close to what my paycheck indicates to be my total Federal Taxable Income, correct? I only have one source of income, and any interest I have made an any savings account (non retirement) is minimal. No debt, no student loans, have not sold any stocks etc.
I want to ensure I am not going to be penalized. Am I understanding this correctly? Thank you
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Not sure on answering your question. But if you are close enough to be concerned I’d recommend doing a backdoor ROTH just in case. Note if you have a Traditional IRA from a 401k don’t do a backdoor ROTH without talking to a tax or financial professional as it’s more complicated.
FWIW, I initiated step 1 of my backdoor ROTH today by transferring the $7,000 into a non deductible Traditional IRA.
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See worksheet 2-1 in Publication 590 (https://www.irs.gov/publications/p590a#en_US_2023_publink1000230985) for what exactly is included in Roth MAGI. Unless you have other IRA transactions or take a deduction for student loan interest it's probably equal to your AGI on Form 1040 line 11.
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See Backdoor Roth - Bogleheads (https://www.bogleheads.org/wiki/Backdoor_Roth) for more on that.