free4now
Thinks s/he gets paid by the post
- Joined
- Dec 28, 2005
- Messages
- 1,228
I made a $4000 contribution to my Roth IRA in November 2007, but now that I'm doing my last minute tax filing scramble, I just found out that since I had no earned income for 2007, my contribution is an "excess contribution" which I wasn't supposed to make. Stupid beginning retiree mistake. Doh.
So it looks like the best thing for me to do is to withdraw the excess contribution of $4000 so I don't have to pay a 6% penalty on it every year. The deadline for me to do this is April 15 (next Tuesday!)
The wrinkle is that because of the market downturns, part of my contribution is now gone. I've contributed $4k in 2006 and $4k in 2007, but my Roth account balance is now only about $7500, down from $8200 on 12/31/2007.
All the info on this situation I can find on the web seems to assume a rising market, where I would withdraw the whole contribution and pay a 10% penalty on the interest on that contribution. But what to do when there is no interest and depending on how you look at it, the $4k contribution may not even be fully there?
Should I just withdraw a fixed $4k amount?
I'll give Vanguard a call but they aren't tax advisors so I'm not sure they will be able to give proper advice.
So it looks like the best thing for me to do is to withdraw the excess contribution of $4000 so I don't have to pay a 6% penalty on it every year. The deadline for me to do this is April 15 (next Tuesday!)
The wrinkle is that because of the market downturns, part of my contribution is now gone. I've contributed $4k in 2006 and $4k in 2007, but my Roth account balance is now only about $7500, down from $8200 on 12/31/2007.
All the info on this situation I can find on the web seems to assume a rising market, where I would withdraw the whole contribution and pay a 10% penalty on the interest on that contribution. But what to do when there is no interest and depending on how you look at it, the $4k contribution may not even be fully there?
Should I just withdraw a fixed $4k amount?
I'll give Vanguard a call but they aren't tax advisors so I'm not sure they will be able to give proper advice.