Author Topic: Already contributed to my Roth, but now might not qualify  (Read 325 times)

Mustachio Bashio

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Already contributed to my Roth, but now might not qualify
« on: June 13, 2018, 04:25:06 PM »
Hey there, I just got a job offer that I believe will put me over the amount you're allowed to make before not qualifying to contribute to the Roth, but I've already contributed for the year.  Can anyone explain to me what that number is exactly?  Does adjusted gross income mean after pretax contributions?  I plan on maxing out my 401k and the new job has matching as well, so does that mean after those deductions have been made from my gross?  And then it says it's reduced from $120,000 to $134,999.  What is it reduced to?  If I need to remove those contributions, how does that work since they've already made a little bit of profit?  I had just opened a new Roth in Vanguard to stop contributing to the one I have in Betterment that I need to transfer over (but the paperwork is kinda a pain so I've been lazy), so it's just this year's contribution plus the $200 that it's made so far.

Thanks in advance for any help or resources!

terran

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Re: Already contributed to my Roth, but now might not qualify
« Reply #1 on: June 13, 2018, 05:49:21 PM »
Here are the limits for Roth IRA contributions: $120k if you're single.

Here is the definition of MAGI for IRA purposes. Chances are if your W2 is under the limit (so gross income less things like 401k), then you should be good.

Here is info from Vanguard on removing excess contributions. I don't know, but I suspect you'll pay tax on the gains at your marginal rate.

Do you have any existing traditional IRA balances? If not, you could consider recharacterizing the Roth contribution as traditional instead of withdrawing it and then performing a backdoor Roth.

talltexan

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Re: Already contributed to my Roth, but now might not qualify
« Reply #2 on: June 14, 2018, 11:38:46 AM »
I had this come up for TY2017. Fixing it was as easy as faxing one form to American Funds (yes, they are sub-optimal for other things) to change all my contributions to TY 2018. If it's still a problem a year from now, I'll fax another form and move them forward one year (paying taxes on the gains).

MDM

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Re: Already contributed to my Roth, but now might not qualify
« Reply #3 on: June 14, 2018, 11:59:30 AM »
I had this come up for TY2017. Fixing it was as easy as faxing one form to American Funds (yes, they are sub-optimal for other things) to change all my contributions to TY 2018. If it's still a problem a year from now, I'll fax another form and move them forward one year (paying taxes on the gains).
Just checking: why do that instead of a backdoor Roth?