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The differences between scenario 1 & 3. In #1 I have to pay a 6% penalty, but I don't really have to do anything else. As long as I only contribute 2660 next year and am below the income limit I'm all square with everything correct? No forms to fill out, nothing, easiest solution?

You'd have one tax form to fill out, the 5329, on which you calculate the penalty.

In #3 I have to fill out a form to withdraw the excess, on that same form happens to be what to do with the excess and I'm able to put that money towards '08 automatically. I would have to pay a early withdraw penalty of 10% my earnings and have to pay any custodian fee Fidelity poses on me. Correct? I don't believe Fidelity has any fees, and I know at least my wifes Roth IRA lost money so hers has a loss rather than earnings (not sure about my own), but it seems like the 10% penalty on earnings + (hopefully $0 fee) would be less than the 6% ($80) penalty for #1.

Sounds like you got it.

As for which way to go, #2 gives you the most money toward retirement in your IRAs, #3 is probably the cheapest in terms of current cash out.

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