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Contribute to Roth in year of retirement?
Old 09-20-2019, 08:32 AM   #1
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Contribute to Roth in year of retirement?

I currently contribute $7000 to my Roth IRA and $7000 to my wife's Roth each January (both over age 50).

We are planning to retire in June of 2023, but I was planning to make one last Roth contribution in January 2023. I'm sure we'll earn well over $14K in the first 6 months of 2023, but what happens if we don't (lose job, have to retire earlier due to health, etc.) and have already contributed 14K to our IRA's?

I assume Roth contributions are based on the same year as the income (2023 contributions for 2023 income)?
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Old 09-20-2019, 09:04 AM   #2
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Say you make only 75% of the 14K. You take out .75 * your balance and you're ok. Do it before you file taxes for the year and there are no penalties.
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Old 09-20-2019, 11:01 AM   #3
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To simplify things, wait until you've made $14K in 2023 before contributing. Then you don't have to worry about overfunding, even though I think it's pretty easy to back out.
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Old 09-20-2019, 11:21 AM   #4
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Originally Posted by RunningBum View Post
To simplify things, wait until you've made $14K in 2023 before contributing. Then you don't have to worry about overfunding, even though I think it's pretty easy to back out.
+1

This is what we do.
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Old 09-20-2019, 04:35 PM   #5
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Originally Posted by sengsational View Post
Say you make only 75% of the 14K. You take out .75 * your balance and you're ok. Do it before you file taxes for the year and there are no penalties.
OP would want to take out 75% of his 2023 contributions. Since OP has multiple years of contributions, he wouldn't want to take out 75% of the balances (well, probably not).

And actually it is 75% of his 2023 contributions plus or minus attributable earnings. But all OP has to do is talk to his IRA custodian explaining the situation and they'll take care of the calculations for him.
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Old 09-20-2019, 04:52 PM   #6
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Originally Posted by RunningBum View Post
To simplify things, wait until you've made $14K in 2023 before contributing. Then you don't have to worry about overfunding, even though I think it's pretty easy to back out.
After doing more research, it does look like it's easy to correct excess contributions. However, waiting till we've earned the money is probably the smarter option. Thanks!
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Old 09-22-2019, 01:10 PM   #7
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Originally Posted by SecondCor521 View Post
OP would want to take out 75% of his 2023 contributions. Since OP has multiple years of contributions, he wouldn't want to take out 75% of the balances (well, probably not).

And actually it is 75% of his 2023 contributions plus or minus attributable earnings. But all OP has to do is talk to his IRA custodian explaining the situation and they'll take care of the calculations for him.
All true. The point of saying "balance" instead of "contribution" was that you need to take out the gains too. So more precisely, you would take out 75% of the balance attributable to the full contribution. As you say, just let the custodian do the math.
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Old 09-22-2019, 07:40 PM   #8
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As the other said it is easier to just wait until you have earned the money. This also gives you more chance to say screw it and leave before June.
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