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cambriancatalyst OP t1_iycn579 wrote

Reply to comment by debbiewith2 in Income exceeded Roth IRA limit by cambriancatalyst

No, I’m still quite green with contributions. Only contributed to Roth the past two years and last year I was making much less.

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debbiewith2 t1_iycng7n wrote

So recharacterize and convert the entire account once it’s collected. You’ll expect to pay tax on the attributable gains that will move over to the traditional IRA. Next year you’ll contribute directly to the traditional and convert as soon as you can.

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cambriancatalyst OP t1_iycnv47 wrote

Thank you. When you say convert as soon as you can, does that imply I convert as soon as I have maxed that years contribution limit or is there some type of schedule you have to follow.

Thanks again and apologies for my ignorance!

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debbiewith2 t1_iyco3sh wrote

You’re fine. Assuming you think your investments will go up, you convert as soon as each contribution collects. That way, there are no earnings to pay tax on - they accumulate in the Roth instead. If you forget or don’t have time, convert that contribution when you think of it or after the next one.

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cambriancatalyst OP t1_iycp74y wrote

Hence the point of the Roth, understood. If I may ask one last question, would you consider it a wise strategy to attempt to increase my last remaining 401k deductions for the year (currently contributing very minimally, like $50 a paycheck) enough to lower my MAGI below the Roth limit? I’m really only a couple thousand over and I think it’d be less effort, both now and moving forward, to attempt that approach.

I’m curious to hear your thoughts if you don’t mind and could spare the time.

Thanks again, very much appreciate your input!

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debbiewith2 t1_iycpgno wrote

Getting more money in tax-advantaged space is generally a good idea! If you can afford to do that and this is a good reminder, go for it!

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