Hi All,
I worked through my taxes last weekend, but have not filed them yet, and discovered that of my $5,500 traditional IRA contribution for 2014 I can only claim $410. I put this money away in March 2014 in a new account along with a rolled over 401k, pension, and 2013 traditional IRA contributions. I was in the process of starting a new job as well. I also hadn't found MMM yet and made some choices that were obviously not stellar.
I just talked to my guy at the bank and he said I can re-characterize the $5,090 into a Roth IRA. By doing this, within the same bank, I can avoid the 1% fee to switch away from Fidelity, however there will be a $50 charge each November until the balance reaches $25,000 which would be at least $150 or $200 in fees.
Also, if I move the money internally within the bank to a Roth and then later move the money to a different bank I will have to pay a fee to close the account of $75-$95. So re-characterizing it internally and dealing with it after taxes are done is not a great option either.
An alternate option is to open a Roth somewhere else and have that bank/website/other option (??) pull the money and do the re characterization. However, this option will come with a 1% fee since I will be pulling the money from Fidelity before the 5 years are up. The "deal" was you only had to pay 1% in fees to get into this mutual fund but then you had to leave the money there for 5 years. Clearly, there's been a bump in the road (making too much money, darn!) and the original plan to leave the money has changed. I would only plan on moving the $5,090 and leaving the rest of the money where it is (although moving it to some kind of index fund in the near future once this dust has settled.)
So I am trying to figure out what my best option is, based on the current situation. I am not wise in the ways of investments yet, but I am trying to learn more. I am assuming just leaving the money where it is and paying taxes on it twice is a bad idea. What does the MMM community recommend as far as a place to open a Roth? Are there certain websites/banks/other options that will help me deal with the re-characterization in time before taxes are due? Any advice would be greatly appreciated! Let me know if I left anything out, I tried to include everything I could think of at the time.
Thank you!