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

Last year I contributed the max to a Roth IRA, but it turned out that my income was too high to contribute. Is it too late for me to fix this?

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.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.