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| *Ostroff, Fair and Company>>>Investing |
What would happen if I contributed $4,000 to a Roth IRA this year and I ended up making more than $95,000? |
I'm 21 years old and I have been making some pretty descent money daytrading. I just opened an Roth and I have funded it. I was wondering if there would be any penalties if I ended up making big money... Cool man, your the man! Very few people make that much money with day trading..And I am glad to see 21 year age dude is putting in Roth IRA, very smart! Anyway, you should treat your case as excess contribution in Roth IRA if you ended up crossing Roth IRA cap! Do not worry, there are couple ways to avoid penalty and those are as follows: 1. Convert Roth IRA money into Traditional IRA before due date of income tax return OR 2. Withdraw Roth IRA money before the due date of income tax return. Note: Remember that earnings on this excess contribution are considered as taxable income. If you do not take any of above action, then IRS starts charging 6% penalty on excess contribution every year till you fix it. For more more info check this link: http://www.theusefulinfo.com/finance/200... Just a bonus info check link here where in 2010 you may be able to put more in Roth IRA if you are ineligible for Roth Today... http://www.theusefulinfo.com/finance/200... Not a legal advice.. -Infoman Source(s): Roth IRA FAQ: http://www.theusefulinfo.com/finance/rot... no penalties for doing well in the ira and the money is taxed previous to deposit so this is the way to use it Since Roth contributions are made "after-tax" you can withdraw them at anytime without penalty. If your income level goes above the Roth phaseout limits you could withdraw the contributions. IF there were earnings in the Roth during the year then you could have them "recharacterized" and contributed to a Traditional IRA (you could also do that with the original contributions if you so chose). There are no phaseout limits on contributions to a Traditional IRA unless you are actively participating in an employer sponsored plan like a 401K as well. Basically, at worst you will have to have the Roth funds "recharacterized" and contributed to a Traditional. roth ira is income taxed first then put into roth, traditional is income taxed when you take it out at your bracket level of when you are 65. so you will be taxed on 99k before you can put it in to your roth. |
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