Oops... Over the MAGI limit & Traditional IRA Contribution question

[jalich]

Hi all,

I have 4k invested in my Traditional IRA. I thought our MAGI would be under the income limit for deductibility for this year, however a larger than expected bonus and pay raise is going to put us completely over the deduction limit. If I had known this from the start, I would have contributed to a Roth IRA. Don't get me wrong, it's a great problem to have!

Do I have any options to "move" this contribution to a Roth IRA contribution? Or do I just suck it up, add the remainder to max to a Roth IRA and deal with my losses. Going forward next year I'll just contribute to a Roth.

Thanks!

P.S. Big thanks to MMM and this forum. The phrase "life-changing" gets kicked around a lot, but this time it actually is!

[SailAway]

You can recharacterize it into a Roth. Just call your investment company and they can take care of it. I was hoping our MAGI would be low enough for the traditional deduction but alas, we made too much. First world problems.

[Joel]

Could you increase your 401k contributions?

[jalich]

SailAway,
Thanks! I'll call them up next week.

Joel,
We will be maxed, but 401(k) contributions don't reduce your MAGI as I understand it.

[Cheddar Stacker]

SailAway,
Thanks! I'll call them up next week.

Joel,
We will be maxed, but 401(k) contributions don't reduce your MAGI as I understand it.

Jalich, your understanding is incorrect. Maybe recalculate everything before you recharacterize.

401k contributions are a pre-tax deduction that decrease your taxable income before it ever reaches your tax return.

[Joel]

As cheddar mentioned, your traditional 401k contributions do reduce your AGI and ultimately your MAGI. Are you sure you are over the limit?