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URL:  http://boards.fool.com/2009-contribution-5000-2010-contribution--29369208.aspx

Subject:  Re: Should I Convert? Date:  6/19/2011  5:35 PM
Author:  TMFPMarti Number:  113543 of 121572

2009 contribution - 5,000
2010 contribution - 5,000
2011 contribution - 5,000
[all excess]

If I understand this correctly, I can withdraw my 2011 contribution with no penalty.

I can withdraw my 2010 contribution with no penalty as long as I withdraw it by October 15, 2011 - 6 months after the April 15.


Correct on both counts, except that you must also withdraw the earnings on the excess contributions. See page 49 of Pub 590. You include positive earnings on your return for the contribution year (you may have to amend 2010), and they are subject to the 10% premature distribution penalty.

I will have to pay a penalty of $600 (6% * $5,000 * 2 years)...or will it count as $900 for 3 years on my 2009 contribution?

Actually, as long as you fix it by 10/15/2011 you'll owe the 6% penalty for only 2009. Again, the earnings have to come with it, and you'll need to amend your 2009 return.

What would you recommend?

Definitely fix it by 10/15/2011.

Also, is there any way that I can contribute to any kind of tax sheltered account while in Korea? Is it possible for me to contribute to an HSA? I don't think I can since I've read that you need a high deductible health plan to contribute to one of those, and I don't have one.

Correct about the HSA. There's no US retirement account you can contribute to. You should check the treaty to see if there are some options available to you there.

THEORETICALLY speaking, check out this future scenario:

It is January 1, 2012. I am in Korea, and I see an explosive stock idea with a severely undervalued stock. I contribute $5,000 to my Roth when I shouldn't. I buy $5,000 in that stock, and I just wait. Before October 15 of 2013, I sell the stock and withdraw $5,000 from my Roth.


By this point in our conversation you realize that this won't work since you must also withdraw the earnings on the conribution to avoid a penalty.

Phil
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