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I just found out that I made too much money in 2001 to have a full Roth contribution for the year, long after the contribution was made.

Do I just call Vanguard and have them return the amount that was too much?

Also, the ivestment has gone down since I contributed. Will the amount I have to take out go down to match the loss on investment?

WiseNLucky
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WiseNLucky asks:

I just found out that I made too much money in 2001 to have a full Roth contribution for the year, long after the contribution was made.

Do I just call Vanguard and have them return the amount that was too much?

Also, the ivestment has gone down since I contributed. Will the amount I have to take out go down to match the loss on investment?


Contact Vanguard and tell them you need to remove the excess. They will compute the amount that must be withdrawn. The loss you suffered will be prorated between the contribution that's allowed and the excess. You will find this topic discussed on page 42 of IRS Publication 590 (Individual Retirement Arrangements) available for download at http://www.irs.ustreas.gov/forms_pubs/pubs.html. While tht part applies to traditional IRAs, the same procedure applies for handling a withdrawal for an excess contribution to a Roth IRA when there's a loss involved.

Regards..Pixy
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Contact Vanguard and tell them you need to remove the excess. They will compute the amount that must be withdrawn. The loss you suffered will be prorated between the contribution that's allowed and the excess.

Just curious, but could you withdraw it all, then re-contribute?

Suppose a $2,000 contribution has fallen 50% to $1,000, and you find you were only eligible to contribute $1,000. Withdrawing the $1,000 excess, adjusted for the 50% loss, would leave $500 in the account. Is there a way to reverse the entire contribution and send in another $1,000 for 2001 before April 15th?
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PMcMullenCT asks:

Just curious, but could you withdraw it all, then re-contribute?

Suppose a $2,000 contribution has fallen 50% to $1,000, and you find you were only eligible to contribute $1,000. Withdrawing the $1,000 excess, adjusted for the 50% loss, would leave $500 in the account. Is there a way to reverse the entire contribution and send in another $1,000 for 2001 before April 15th?


That's an interesting question to which I have no definite answer. Maybe one of the lurking tax gurus out there may know for sure. I suspect that can't be done because the original contribution along with the subsequent withdrawal would be reported to the IRS by the IRA provider. And, because you can't make but one $2K contribution for 2001, the second deposit of that amount wouldn't be allowed. But again, I don't know for sure.

Regards..Pixy
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Thank you Pixy.

WiseNLucky
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Just curious, but could you withdraw it all, then re-contribute?

Suppose a $2,000 contribution has fallen 50% to $1,000, and you find you were only eligible to contribute $1,000. Withdrawing the $1,000 excess, adjusted for the 50% loss, would leave $500 in the account. Is there a way to reverse the entire contribution and send in another $1,000 for 2001 before April 15th?


PMcMullenCT:

This is an interesting question, but I think the risk is too high to try it. Thanks for the suggestion, though.

WiseNLucky
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I know this is coming late, but I've also just discovered that I over-contributed to my Roth IRA in 2001.

After reading IRA Pub 590, the section titled "Can I Contribute to a Roth IRA?" I noticed this note at the very bottom:

Applying excess contributions.
If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year.


Can I ask what action you decided on and how it worked out for you? I'm thinking of trying out the solution above.

OLF

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