Jump to content
bk10s

Excess Roth Ira Contribution

Recommended Posts

Hello All - Always get wonderful suggestions and love to read about what others are doing. Here is one for you: My wife and I always max out 403b and Roth IRA contributions. When our district offered Roth 403b we thought it was great and went for it in 2011 - Maxed our Roth 403b contribution. Remember, we max our regular Roth IRA contribution as well. I am doing our taxes and........Our AGI is above the limit for a Roth IRA. I understand that I can fix that. Here is the question: Should we go back to a regular 403b instead of the Roth 403b so that we can continue contributing to the Roth IRA? Does this question make sense? Many thanks -

 

P.S. I am 50 and my wife is 49.

Share this post


Link to post
Share on other sites

You can buy more in a Roth 403b so by all means continue if it makes sense for your situation.. If your regular roth contributions exceeded your limit you will have to pull out the money in excess and pay tax on the earnings otherwise the IRS will levy a heavy fee.

Share this post


Link to post
Share on other sites

You can buy more in a Roth 403b so by all means continue if it makes sense for your situation.. If your regular roth contributions exceeded your limit you will have to pull out the money in excess and pay tax on the earnings otherwise the IRS will levy a heavy fee.

 

I also want to add that a Roth IRA and A Roth 403b are distinct from each other so you could actually max out both. I don't think the 403b Roth has an AGI rule just a contribution limit.

 

Another factor is with a Roth IRA you can choose your fund of choice. In a Roth 403b you may be limited to what the plan offers. The fees might be higher too.

 

I hope this is what you wanted to know and I hope I gave you the correct Information.

 

 

 

 

Tony

Share this post


Link to post
Share on other sites

Presently, our AGI is too high for a Roth IRA. Do we go back to a traditional 403b instead of the Roth 403b so our AGI would be lower and we would be able to contribute to the Roth IRA?

Share this post


Link to post
Share on other sites

I am not sure there is good individual answer to your question. You have to decide whether deferred or a roth is the best choice in your 403b.

Share this post


Link to post
Share on other sites

BK,

I think I know where you are going with this. What you are suggesting is what I do...sort of.

 

I put enough in my Traditional 403b (tax deferred) to lower my AGI enough so that I am able to contribute to a Traditional IRA on my own. I've been doing this successfully for the past two years. (I do not own a house, kids are grown, and I need all of the tax write-offs, so no Roth for me right now). If you are doing your taxes, you can figure out how much lower your AGI needs to be in order to qualify for the Roth, then start contributing to the tax deferred 403b next year to achieve that level of AGI. (I hope I am making sense now!)

 

Can you split your 403b between Roth and traditional? That way you could put only enough in tax-deferred to reduce your AGI to where it needs to be.

 

I'd be looking up the tax laws on that....Good luck!

Share this post


Link to post
Share on other sites

Maybe this article will give you some perspective. I am finally at the point in our life that we (wife and I) can max out our 403b deferred but poor enough (AGI)that we qualify for inclusion in a regular Roth IRA. Still, I am trying to figure if it would be best to go 50/50 Deferred/Roth in my 403b or even 100% in a roth. There are so many contradictory opinions on this subject that I am confused. My gut feeling is that we should go 100 Roth in my 403b and get that money free of taxes but then sites like Boglehead say its best to defer income in a 403B. The current tax rate is as low as it was in 1954 so it can only go up even though in retirement our income goes down.

 

Every situation is different and I am even having trouble figuring out the best approach for me. In your case I think deferring money so that it lowers your AGI and qualifies you for

a Roth IRA makes sense.

 

I would like Mark to again weigh in on this if he's out there paying attention.

 

 

 

 

http://online.wsj.com/article/SB10001424052970203718504577179211318487418.html

Share this post


Link to post
Share on other sites

I think I like what Kat does. We still want to contribute the max to the regular Roth IRA so I think we will change our 403b contributions. I am considering going 1/3 into the traditional 403b and 2/3 into the Roth 403b. Then, our AGI will be lower. What do you all think? Many thanks

Share this post


Link to post
Share on other sites

If you can thread the needle of lowering your Adjusted Gross Incomen via the pre tax contributions to the Traditional 403b, do that and then contribute to the ROTH.

 

I would max out my 403b IF the provider has reasonable fees. Then contribute what you can to the 403b roth and/or Roth IRA. The 1/3 vs 2/3 idea really depends on how much it lowers your income and keeps you eligible for the ROTH. For 2012 Roth IRA's, AGI must be below $173,000 (and is fully phased out at $183,000 for Joint Filers.

 

In my opinion (like those on Bogle)it's always best to maximize your pre tax contributions. It's wiser from a tax perspective. Then maximize the Roth, then contribute to taxable accounts.

Share this post


Link to post
Share on other sites

BK,

Here's how I would do what you want to do:

 

1. Lower your AGI to where it needs to be by contributing to the Traditional 403b (tax sheltered).

 

2. Then contribute DIRECTLY to a Roth IRA through Vanguard, max it out.

 

3. If you still need to put more away, you can certainly contribute more to your 403b (Roth or Traditional). But wherever possible, I like to invest directly with the company (Vanguard) to keep fees low and keep control.

 

For me, the trick has been to manipulate my AGI low enough so that I can "throw some dough" into my personal IRA at the end of the year.

 

That's my 2 cents for the day...kat

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...