Roth IRA mistake - Help! What do I do?

[FIreSurfer]

Hi folks!

I just read some post on the forum that mentioned that for 2017 the maximum income cap to be allowed to contribute to your RothIRA is $196,000 for a married couple.
I didn't know this and already tossed $4500 into my Roth at Vanguard over the past few weeks (last year I didn't make as much salary and it wasn't an issue).

What do I do now? Can I just withdraw the funds? Create a traditional IRA with Vanguard and move the funds to that account?

Help!

Thanks!

O.

[MDM]

Hi folks!

I just read some post on the forum that mentioned that for 2017 the maximum income cap to be allowed to contribute to your RothIRA is $196,000 for a married couple.
I didn't know this and already tossed $4500 into my Roth at Vanguard over the past few weeks (last year I didn't make as much salary and it wasn't an issue).

What do I do now? Can I just withdraw the funds? Create a traditional IRA with Vanguard and move the funds to that account?

You have the right general idea.

See IRA recharacterization - Bogleheads and Backdoor Roth IRA - Bogleheads for details.  You aren't the first in this situation, and it is very manageable.

[Cwadda]

I recommend calling Vanguard and talking to them about the situation. I had a similar situation and the reps were knowledgeable "tax-savvy" about ironing things out.

[FIreSurfer]

Thanks  - I think I'll call into Vanguard but I did see from that article that you can move things around through October if you made the mistake I made.
I couldn't find any literature specifying whether that max number was for AGI or total - if anyone knows for certain and has lit to back it up I'd be curious to know as that would make the difference.

Best,
O.

[Cwadda]

Thanks  - I think I'll call into Vanguard but I did see from that article that you can move things around through October if you made the mistake I made.
I couldn't find any literature specifying whether that max number was for AGI or total - if anyone knows for certain and has lit to back it up I'd be curious to know as that would make the difference.

Best,
O.

Vanguard should be able to assist you in making the optimal decision as far as moving money around. They helped me re-characterize money from one year to the next when I made a mistake a couple of years ago.

[MDM]

I couldn't find any literature specifying whether that max number was for AGI or total - if anyone knows for certain and has lit to back it up I'd be curious to know as that would make the difference.

See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits and links therein.  It's "modified AGI" - see the links for how that is calculated.