Author Topic: Not sure if I should fund our 2013 Roth  (Read 3847 times)

Honest Abe

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Not sure if I should fund our 2013 Roth
« on: March 09, 2013, 09:17:09 AM »
Just finished our taxes..My wife and I were pretty close to the income limit to contribute to our Roths in 2012. Not sure what next year will bring.  Should we fully fund our 2013 Roths now and deal with the possible over-contribution later?

Zaga

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Re: Not sure if I should fund our 2013 Roth
« Reply #1 on: March 09, 2013, 09:20:22 AM »
Yes, you always have the option to recharacterize your contributions if you find out that you are over the income limit.  Then use the backdoor Roth option if your situation allows it.  If not, then you'll have a traditional non-deductible IRA, which isn't great, but it isn't terrible either.

Honest Abe

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Re: Not sure if I should fund our 2013 Roth
« Reply #2 on: March 09, 2013, 09:36:59 AM »
Oh so whatever I over-contribute will get put into an after-tax IRA with no tax benefits and the same withdrawal restriction. Yeah not great, but not the end of the world?

firefergy

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Re: Not sure if I should fund our 2013 Roth
« Reply #3 on: March 09, 2013, 10:24:27 AM »
The limit for Roth is 173000 correct?  How do deductions factor into this?  Last year we are fine on the income level but this year with my wife back at work will will gross over that amount.  Is the 173k on taxable gross or total gross?

Zaga

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Re: Not sure if I should fund our 2013 Roth
« Reply #4 on: March 09, 2013, 11:14:58 AM »
The lower and higher cutoff values in 2013 are $178,000 and $188,000 respectively.  This is based on MAGI.

http://roth-ira-contribution-limits.com/roth-ira-income-limits-2013/

chucklesmcgee

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Re: Not sure if I should fund our 2013 Roth
« Reply #5 on: March 09, 2013, 12:38:34 PM »
You can just do a precautionary back-door Roth IRA conversion to get around the income limits.

icefr

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Re: Not sure if I should fund our 2013 Roth
« Reply #6 on: March 09, 2013, 05:31:25 PM »
I was in that situation this past year and I ended up choosing to wait until now to fund my 2012 Roth IRA, mostly because I wasn't sure if I would use the backdoor when it came down to it.

The 178-188k is based on taxable gross. It's basically line 37 of your 1040 and includes dividends, interest, and capital gains.

Nords

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Re: Not sure if I should fund our 2013 Roth
« Reply #7 on: March 09, 2013, 10:38:18 PM »
Oh so whatever I over-contribute will get put into an after-tax IRA with no tax benefits and the same withdrawal restriction. Yeah not great, but not the end of the world?
You could also put the amount of your contribution into a savings account until next Jan-Feb-March, do your tax returns, and then make the 2013 IRA contribution to the appropriate type of account.  You'll earn less interest but you'll do less paperwork. 

Undecided

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Re: Not sure if I should fund our 2013 Roth
« Reply #8 on: March 09, 2013, 10:44:37 PM »
Oh so whatever I over-contribute will get put into an after-tax IRA with no tax benefits and the same withdrawal restriction. Yeah not great, but not the end of the world?

But at that point why wouldn't you backdoor Roth it? You're paying current income tax either way, but getting the growth tax free.