I got a little excited about funding my Roth IRA a couple weeks ago and today I realized that last year, I exceeded the maximum for direct Roth IRA contribution.
So a couple weeks ago I put $1,500 directly in to my Roth IRA account. It's been in Cash Core since then (I haven't invested it in anything yet). Since then, it has accrued interest of $0.02 bringing my Cash Core balance to $1500.02.
What should I do?
- Request withdrawal of the $1,500, put it back in my savings account and just wait until the end of the year to do a full $5,500 backdoor Roth? If I do that, and the $0.02 extra in Cash Core stays the same, would I still do a $5,500 contribution or do $5,499.98 contribution? I'm guessing the latter in this scenario, since, I'm going to have to pay taxes/penalty on that $0.02?
OR
- Recharacterize the contribution as a non-deductible traditional IRA contribution instead. Now, if I do this option, can I invest the $1,500? Reason I ask is, if I invest the $1,500 and let's say by year end it is $1,700, would I be allowed to put in $3,800 non-deductible contribution in to that tIRA and then roll it over to my Roth with no tax consequences? If so, would a good backdoor Roth IRA strategy be to put some money in a tIRA, invest it tax-deferred, hopefully it grows a little and then that's less money I need to pull out of savings to fund the backdoor later? (Course the risk is the tIRA declines in value and I have to overfund it I suppose)