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if you contribute too much to a ROTH...

Hi all. If one contributes to one's ROTH to the max, early in the year, and then manages to earn more than expected, into or beyond the contribution phase-out range, is the solution to simply withdraw the contribution amount? What if the contribution was invested, and gained before being liquidated and withdrawn? Does one withdraw the gain as well and declare it as short-term gain? thanks, Joe

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Reply to
joe.weinstein
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You can withdraw or transfer to non-deductable traditional IRA. In both cases the earnings or losses are proportional the fraction of the contribution at the time of the contribution and the IRA trustee figure this number out for you.

The traditional IRA will then have an after-tax component and a possible tax-deferred component. The first is called the basis and reported to the IRS in form 8606 when it changes. You wont have to pay tax a second time when funds are witdrawn in retirement on the basis part of the IRA.

For the year 2010 the AGI limit is removed for Roth. You can convert old amounts. Some poepel I know are stuffing their traditional IRAs with after-tax contributions for 2010. (This assumes the new President doesnt change this law.)

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
rick++

I came across this issue one year when I sold some stock options. I found out that the contribution had been excessive and then I had to withdraw the balance. The brokerage firm, TDA, charged a "hefty" fee of $25 for this withdrawal.

Was my decision then of only contributing to an IRA after I've done the taxes, but before April 15 of the next year, right?

TIA

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Augustine

If you get good returns on your investments, it would be best to contribute early.

-- Ron

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Ron Peterson

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