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Minna asks:

<<How do you remove the excess? Suppose you start a Roth in January and then make too much money that year to be eligible (happy days!). Do you back out the contribution + whatever gain you have made on it into some other account? Do you have to sell whatever you invested it in to do that?>>

For a Roth, you have until 4/15 of the year after the contribution year to redesignate the IRA as a traditional IRA. All that's required is notify the custodian in writing that's what you want done. You have to sell nothing, and there will be no taxes or penalty. The custodian may charge a fee for that service. Alternatively, you may have the excess contribution refunded to you along with any earnings. Again, the custodian may assess a fee for doing so. You will pay taxes on the earnings just as you would on any such income. Additionally, if you're younger than age 59 1/2, a 10% penalty will also be assessed against those earnings.


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