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Can anyone send me to a link that outlines how to invest in an IRA if you are going to exceed the income maximums? I recall reading something about a 6% excise tax, but am not sure if that means you can fund the IRA even if you don't qualify as long as you pay the penalty.

My thoughts are that if the only penalty is the 6% it would be worth it based upon the Roth IRA benefits when funds begin to be withdrawn.

Thank you

Jim
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Well---just reviewed the IRS document and the excise tax penalty will occur every year until you correct the overage. Answered my own question...
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If in doubt the best source of information is Publication 590 available on line at the irs.gov website.
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Yes, the 6% penalty applies each year, although this penalty is only on the excess contribution amount, not on its earnings. I'm not aware of any more stringent penalty than the annual 6%. Thus, if you think your contribution can consistently provide much better returns, you could just leave the excess and its annual penalty in place. The deadline for its removal is Oct 15 of the next year, so for an excess contribution you make in 2013, you have until Oct 15 of 2014 to withdraw before the penalty will apply. If you withdraw the excess, you must also withdraw the associated earnings which will be ordinary income subject to the 10% early withdrawal penalty if one of the exceptions does not apply (such as being 59.5). However, if you do a recharacterization to a TIRA, you must move the excess contribution and associated earnings from the RIRA to the TIRA and there is no withdrawal of earnings and so no tax or penalty.

And keep in mind that the excess can be used as next year's contribution, providing you leave it in and pay the 6% excise tax, and providing you'd qualify to make a contribution the next year.

BruceM
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