Excess contribution in your Roth IRA? What to do?

No video

Excess contribution in your Roth IRA? What to do?

Рет қаралды 14,776

6 жыл бұрын

What happens if you put to much in your Roth IRA or you become ineligible to contribute to your Roth IRA because your income was too high? This is not something you want to mess around with so it's really important that you keep track or have someone like jazzWealth help you. The IRS is very clear about the rules rgarding excess contributions to your Roth IRA and the max income you can have to contribute. Today Dustin will cover these topics with you.

Пікірлер: 51

@pedrofeliciano7041 5 жыл бұрын

you just clarified a doubt I had related with Roth IRA, thank you.

@sarahlim3064 5 жыл бұрын

This is exactly what I needed. Thank you so much!

@Jazzwealth 5 жыл бұрын

Thanks for watching!

@littledaddy391 6 жыл бұрын

Thank You so much on this one----I was a bit worried didnt know if that was a really bad thing..i put $300 too much in my Roth as soon as i realized it i tried to cancel the transaction but was too late.. i pull it out AS soon as it hit my account .. i will sleep a bit easier because of this video ... Thanks Again

@cesaraviat 3 жыл бұрын

Did this work for you? I’m on the same situation, thanks

@littledaddy391 3 жыл бұрын

@@cesaraviat yes it did..i had no issues at all

@Rhobinson1993 6 жыл бұрын

This was very helpful!

@kukurei 5 жыл бұрын

I recharacterize a 300 roth contribution to a traditional, but when i received my 1099 tax form, it says taxable on box 2a. Is it incorrect? I know i shouldnt be taxed on the recharacterization and i should be able to deduct the traditional contribution. Can you please clarify?

@gk_filer 5 жыл бұрын

I had this happen this year 2018 for 2017 due to a large severence then retirement. 1099-R has a PJ code even though I was 64 when this happened Do I have to ammend 2017 return and what form do I report it on a Form 590A or 590B

@karenricotta5558 5 жыл бұрын

How can u convert a roth to a traditional? If you paid income tax pre roth contribution then convert will you then pay income tax again when you withdraw from your traditional?

@manp1039 3 жыл бұрын

it is still unclear how to figure out how much of gain/loss is attributable. And it is my impression that gains would be income from dividends? Is this correct? I mean if you own stock that you bought from within the IRA.. and you have not sold them.. ther is not yet anty income from those stocks.. and only dividends paid to those share would be income. Is this correct?

@acepaul407 4 жыл бұрын

How would you handle excess contribution if it was made 2 or 3 years ago?

@andrewnitzschke5998 6 жыл бұрын

Good information as always. I was hoping you would touch on other options for saving for retirement if you get capped for max contributions or income limit exceeded.

@Jazzwealth 6 жыл бұрын

Did a great class for our customers that broke down the different directions and numbers ;)

@johnkeenoy6667 4 жыл бұрын

Hey, Just found you, really found this information helpful. Hoping this question finds you. If Im not sure whether i will make under/over the income threshold for a roth ira and have already contributed for the year of 2020. What are my options if I do go over the income limit. If this finds you I'd appreciate the help!

@amuseinthecraftroom6257 4 жыл бұрын

Is it the same if you contribute too much to an hsa?

@manp1039 4 жыл бұрын

it seems that another option would be to recharactor the amount over the limit, including the net attributable income for the excess? Also is seems that the excess contribution would be the last partion conttibuted and for example. say a person put in payments throughout the year once per month.. it might be only the last month or two of contributions that would have been the excess portion, and they may not have even yet been invested, and if they were, the gains would probably be a small percentage of the over all gains for the fund that year. They wouldn't have had much oppotunity to compound like other investments earlier in the year which migh have had some dividends which were reinvested. I can also see scenarios where a person may have had a windfall of additional income later in the tax year they they could not have planned on.. It could have been from additional work or some unearned income from investments. or a bonus. BTW, I am presuming unearned income from investments would be added to the graoss income for the eary in terms of qualifiying for contributing to a Roth IRA?

@lowstringc 6 жыл бұрын

Mic suggestion/possibility: use a wireless mic/receiver, and have a hung area mic just above the camera frame as a backup just in case. For what you do a lapel (or an ear-worn but that would look a little odd for video imo) is really best and the most consistent, and since you are doing more live and already have at least a 2 channel audio interface for those two mics, it would be good to have an overhead mic in case of any problems with the lapel. Set your gain staging well, and feel much more unencumbered and sound better to boot! Note: I wouldn’t actually use the two mics in conjunction or you might get some weird phase cancellation issues, I’d just have the overhead for insurance. Keep fighting the good fight, you’ll eventually get a setup that works well for you.

@Jazzwealth 6 жыл бұрын

It was my fault. Broke the old one...got three more today so always have a backup of a backup now ;)

@djg093 5 жыл бұрын

The explanation was helpful but how does one decide to either eat the 6% penalty or withdraw from their Roth and take the 10% hit on what they withdraw? I know it will roll over if I leave it there but for the sake of the return which decision will yield a higher tax return? ex. If you contribute 2k over your 5.5k and then take the 6% tax on it that is -$120. If you withdraw it that is a 10% tax of -$200. Which route is better? Hope the question makes sense.

@manp1039 4 жыл бұрын

that is a qood question.. And from what i understand from his other video, sometimes the recharactorization of the excess into a traditional IRA, if that is possible, meaning you have not gone over the total contributions cap, then that portion moved from the roth to the tradtional would then get the benefit of being income tax deferred. But if a person blew passed the maximum allowable of 5500 or what ever their cap was, It seems to me that the IRS would not penalize a person that recharactorized that portion inot ordinary income, with all gains attributable to that portion of money would also be taxed.. It seems like they would be good to go .. no penalties i would think. And if it is done before tax day, there would not be any interest, becuase the income tax is not due until tax day anyways. Am I wrong?

@Misokrayz 5 жыл бұрын

This is a older video but if there are any towels left I will totally take one!!!

@mariobros6805 6 жыл бұрын

Hello Dustin, my understanding is that on a rothIRA you will not receive a 1099B at tax time like you would for a regular individual investment account, could you corroborate this? Thank you

@Jazzwealth 6 жыл бұрын

No need. You nailed it ;)

@fiorrellaworker9162 5 жыл бұрын

Jazz, I have two roth ira can I leave one next year grow alone without contri. and the other one working or I have to cancel it one and stay with one only thank you

@Jazzwealth 5 жыл бұрын

You could leave it or move one I to the other so you just have the one ;)

@MrLionken07 6 жыл бұрын

now 189K for married file jointly that's 5500 per person? or 11000 total for the couple?

@Jazzwealth 6 жыл бұрын

Yup. 5500 each

@Virtues162 Жыл бұрын

Many thanks for the great video Dustin ____This is an excellent video and I believe it would have been even better if you had added a couple of minutes explanation of tax implication! If you end up with a lesser amount _ you withdraw that lower amount. Is the NIA the lesser amount that you withdraw or the amount by which it is less than the original contribution? For example, you contributed 6000, there was a loss and the withdrawal amount becomes $5000 after the calculation. What is called Net income attributable (NiA)? is it the $5000 that you withdraw? Or, is it the $1000 by which it was less than the original $6000. What are the tax implications? Will claim the $1000 as a loss in you tax fling? Many thanks in advance for your help.

@losmoney82 5 жыл бұрын

Lets say your contributing the max amount of 6000 per year and contribute an even amount weekly to reach 6000. You choose to reinvest the dividends also. Could you change the amount per week that you contribute so the reinvested dividends wont put you over the 6000 amount for the year?

@manp1039 4 жыл бұрын

I don't think dividends are calculated int figuring out how much is in excess. I think it is only the contributions that are totaled for the year. From what i understand him saying if there is an excess in contributions (money put in) during the year.. the portion that is in excess and any attributable income (gains from stock increase or dividends and gains from divdidends reivinvested) would have to be taken out of the account or if still possible could be recharactorized into a traditional IRA acct?

@haveagreatone 6 жыл бұрын

There's a cap on how much one can put into a roth ira so why does how much one makes, make a difference when they're creating the rules of the account.

@anfitch8706 5 жыл бұрын

The idea is that if someone happens to "set it, and forget it" and they happen to exceed the salary limits then they must remove the tax year contributions from the Roth and move them to a Traditional IRA or other vehicle. I believe your assumption believes the person saving is A) paying attention to what they're doing, B) paying attention to their pay stubs, and C) familiar with what the salary caps are for their tax situation.

@manp1039 4 жыл бұрын

@@anfitch8706 i think an excess contribution could happen inadvertantly, especially at the end of the year. It seems to make sense to contribute as much as possible and as soon as possible in that tax year to benefit from maximum possible tax free gains.. but if a person has a windfall at end of year, it could partially or totally disqualify them from contributing into the Roth IRA. Thankfully there is an option to transfer or (recharacterize it into a traditioanl IRA. What confuses me is if a person already has money in their Roth IRA from prior years of proper contributions.. they wouldn't want to close the Roth IRA.. they would just want to remove and recharactorise the excess portion and attributable gains from the excess contributions. I can't imagine how that could be done in any clear way. stocks and bonds and options can be bought and could perform differently from eachother. and once the money is in the big pot.. it might be possible to see if a purchase is made. but it can get very unclear very quickly if portions of the stock are then sold. And I presume it is legit to leave the uninvested portion with what ever interest they could accrue from the core account or fund they are sitting in. And you don't have to attibute the best performing stocks arbitrarily. I can see possibly doing a formula to average the gains and the date when the excess contributions were maid and then give a percentage of the bains pro rate , the number of days the funds were in the account to just simplify things.

@TigerOscar78 2 жыл бұрын

What happens if you made a contribution while income was much higher than the limit, and had unrealized losses for the entire year?

@Paul-qr5kz 2 жыл бұрын

Then you still need to remove the excess contribution or recharacterize it. But the amount to be transferred out of Roth IRA will be less than the amount of contribution, because you had an unrealized loss.

@TigerOscar78 2 жыл бұрын

@@Paul-qr5kzthank you. I actually recharacterize my contribution. Now I am trying to set up a backdoor Roth between aTraditional and Roth IRA...

@yasely01 5 жыл бұрын

Hi love your channel. If i am a stay at home mom and can my husband open & contribute to a traditional IRA and a ROth IRA both on my name even though he already have 2 on his name? He is making alittle over $100k Thank you

@ctchawaii3515 6 жыл бұрын

I’m single, with a Roth IRA and a traditional IRA with the same brokerage company. Is the Max contribution for both accounts 5,500 or 5,500 each?

@CarlosRodriguez-yd5fv 6 жыл бұрын

ctc hawaii If i remember right i belive its 5500 for both combined

@elohcin42 6 жыл бұрын

It is for both combined. You can't contribute $5,500 to a Roth AND $5,500 to a traditional in the same year.

@ctchawaii3515 6 жыл бұрын

thats what I thought. thanks

@Jazzwealth 6 жыл бұрын

Good advice from our viewers. Thanks all!

@theDavidChannel1 5 жыл бұрын

No need to have two IRAs

@oscartorres7689 6 жыл бұрын

Filed Single in 2017, my AGI was over $122K. Based on calculations on Fidelity, I can only do a partial contribution of 3,300 for 2018. My AGI for 2018 will be over $130K. That means i can only contribute even less for 2019. Correct?

@Jazzwealth 6 жыл бұрын

Depends on your filing status. You could be phased out all together for the year

@ljrockstar69 2 жыл бұрын

I don't like it, there's always a catch to saving for retirement. I feel like you lose either way, Roth or Traditional. I hate the IRS.

@freeagent.87 6 жыл бұрын

wish I saw this video a month ago when I made this mistake

@Jazzwealth 6 жыл бұрын

You can still fix it

@benfrombc 5 жыл бұрын

i don't get it , why am i able to put in my roth IRA around $ 320 every two weeks form paycheck. and they said it's completely tax free whatever in my account when i am after 59 and 1/2

@prettybrwneyez7757 5 жыл бұрын

Ben Calm You may have an EE Roth through your job where the job puts the money in the Roth post-tax, meaning the taxes have already been taken out.