Roth IRA Issue

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  • Drop it into MD Drop it into MD 
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    So I am an idiot and must have contributed directly to my Roth IRA by accident.  I talked to vanguard and they said after the funds arrive they can recharacterize it back to the Traditional and then I can covert.  Did anyone deal with this before?   Thanks for the help.

    #178303 Reply
    Avatar jacoavlu 
    Status: Physician, Small Business Owner
    Posts: 2462
    Joined: 03/01/2018

    I’ve not done this but it happens not uncommonly. Perhaps more often not as a mistake. But someone thinks they’ll be able to make a direct Roth contribution. Then income rises or whatever. So they’re not eligible. No big deal. There is no reporting for the recharacterization I’m aware of. Fill out your 8606 as if the Roth contribution never happened.

    The Finance Buff's solo 401k contribution spreadsheet:

    #178305 Reply
    Vagabond MD Vagabond MD 
    Status: Physician
    Posts: 3486
    Joined: 01/21/2016

    I almost did it on my wife’s behalf yesterday. I can totally see how this might happen. Should be a minor hassle to fix. No long term repercussions, though.

    #178307 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4671
    Joined: 01/08/2016

    This is the same as making the mistake of having too much income.
    Recharacterize, convert, pay the tax on the extra.

    #178326 Reply
    Drop it into MD Drop it into MD 
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    I spoke with vanguard again today and they were able to recharacterize it and it should be ready for me to convert Monday.  I was able to convert my wife’s today without issues.

    I just have to say how easy and helpful the Vanguard reps were.  I was worried when I saw the banner over the contact info that said this time of year has high call volume and blah blah.  But they picked right up each time and it was very easy.

    #178584 Reply
    Liked by Peds

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