Roth IRA Question

[arv123]

Hello,

Great forum, love all the information.

Question about IRA eligibility.  I am married, and this year our combined income will more than likely be very close to the max amount before being ineligible to contribute to a Roth IRA. 

I am in sales and most of my income comes from commission. If I have a big three months to end the year, how do I know I can't contribute?  If I have maxed out my Roth, and wife's, before the end of the year, what happens to that money if I go over the limit?

I appreciate the advice.

[bacchi]

Withdrawing excess contributions isn't really that bad (at Vanguard, anyway). There's a form to fill out and that's pretty much it.

Can you increase your 401k or HSA contributions to avoid the income limit?

Eta: If you haven't yet contributed, wait until next Spring to do so. You have until April 15th to contribute for the prior year.

[arv123]

Great- using vanguard for both accounts.

My 401 will be near maxed this year, but plenty of room for the wife's.

Do you subtract the 401 contributions from the salary when factoring in what the total income is for Roth?

[bacchi]

Great- using vanguard for both accounts.

My 401 will be near maxed this year, but plenty of room for the wife's.

Do you subtract the 401 contributions from the salary when factoring in what the total income is for Roth?

Correct. The income limit is based on MAGI, which excludes 401k contributions. In other words, increase 401k contributions to reduce your MAGI to hopefully squeeze in under the Roth limit.

[MDM]

Correct. The income limit is based on MAGI, which excludes 401k contributions. In other words, increase 401k contributions to reduce your MAGI to hopefully squeeze in under the Roth limit.

+1

And if you make too much to get in the front door for a Roth, use https://www.bogleheads.org/wiki/Backdoor_Roth_IRA.

If your situation is straightforward enough the MMM case study spreadsheet will do the MAGI and maximum contribution calculations for you.  For the final answers, as bacchi notes, tax software you use in 2016 for your 2015 return will provide exact numbers.

[arv123]

Awesome- thank you everyone for the info and help.