What Can I Do to Fix a Roth IRA Contribution When I Exceeded the Income Limitations?

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By on October 4, 2017 in Q&A, Retirement with 0 Comments

Words 'Roth IRA' on a spread of hundred dollar bills

Q.  Last year I contributed the $5,500 limit to a Roth IRA.  It turned out that my 2016 income was too high to contribute to a Roth IRA; is it too late for me to do anything about it?

A.  It’s not too late yet.  You have until October 16, 2017 to recharacterize your contribution to a traditional IRA.  A recharacterization is a tax-free transfer of funds from one kind of an IRA to another.  Your IRA custodian will directly move the funds you choose to recharacterize, along with the earnings or losses attributable to them, from (in your case) a Roth IRA to a traditional IRA.

Recharacterizations can also be used to undo a Roth conversion if it is to your advantage to do so.  The funds must be recharacterized by the final due date (including extensions) of your federal income tax return which, this year, is October 16th.

If I were you, I would contact your IRA custodian as soon as possible.  If you wait until too close to the deadline, they might not be able to complete the transaction by the deadline.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

© 2018 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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