“What happens if I contribute too much to a Roth IRA?
If you contribute more than allowed, you are subject to a 6% excess contribution penalty. However, you have until the annual contribution deadline (generally April 15th) to withdraw any overage from the account before the penalty is assessed.”

So, let’s say someone drops $10k into a Roth IRA on May 1, 2013. They’d accumulate more earnings in their account than if they contributed the maximum $5,500, but they’d be subject to the 6% penalty. UNLESS they withdraw the $4.5k overage in contributions, BEFORE the deadline (let’s say they did that April 1). Then, they’d be investing more than the max, thus getting greater compounded returns (tax free). They also wouldn’t pay the penalty, since they took out the contribution that put them over the maximum.

Is this a loophole? Or did I misunderstand or miss something?

Then the 2nd issue comes into play, since they have determined that the LLC is actually you, then your adult children in essence made a loan to you from their Self-Directed ROTH IRA’s which is a prohibited transaction.

I am not even sure if I have worded it properly but I think they would get the drift.

I live and work in Asia, and have a Roth IRA that I would like to contribute to. I have a salary, which is under the Foreign Income Exclusion of 92.21K, so I report that on my tax return, but don’t pay taxes on it. I do pay taxes for a very small earnings off of a stock sale–well I would if it was big enough, but it IS a taxable income. Couple of bucks, really. I have heard that if I make less than US$2000 taxable income, I can only contribute that amount. Is that correct? So I work full time, make money full time, but only make US$500 during the year from stock sales (other than my non-taxable foreign income), I can only contribute $500?

All the literature/websites state that if you make “any taxable income”, you can contribute, but they don’t specify if you can contribute the full amount. I don’t buy it. Can you clear this one up?

I read that the contribution to a Roth IRA can be withdrawn at anytime, but the earnings only after age 59 1/2 and after 5 years have passed. I am 67 and the 5 year period has passed.

Now that I want to withdraw both the contribution and the earnings, both these have dissappeared, it is the “balance of the account” that can be withdrawn.

Is that how it works with investment in Mutual Funds?

I’ve been buying a REIT index fund (automatic investing) for the past 18 months or so.

I’m sure it will come as no surprise that the balance of my IRA is now lower than the amount I’ve contributed to it. I’d imagine it will still be lower than the amount I’ve contributed to it in 2010, when I roll it into a Roth IRA.

My question: if my traditional IRA balance is lower than the amount I’ve contributed to it at the time I make the conversion to a Roth IRA, can I deduct the loss from my income by reporting a tax loss on my tax return?

I know I couldn’t do so if I were converting a traditional deductible IRA to a Roth IRA, since the funds are only taxed at withdrawal (so there would be no tax loss), but since I am only converting non-deductible funds, there IS a tax loss. I’ve searched high and low, but I haven’t found any articles or commentary that address my situation. I’m sure there are other readers in the same boat.

Can you please point us in the right direction? Thanks very much.

[...] The GRS Introduction to Roth IRAs series Part 0: How compound returns favor the young Part 1: What is a Roth IRA and why should you care? Part 2: How to start a Roth IRA (and where to do it) Part 3: Which investments are best for a Roth IRA? Part 4: Questions and answers about Roth IRAs [...]

Questions: Can I max out the $15,500/year contribution limit for 401(k) plan with my employer? Can I also max out the $4000/year contribution limit for Roth IRA for my wife and I, totaled $8000 for Y2007?

#15 CHR – It’s up to you on the investment – it looks like the FFFHX is a very new fund but has a good expense ratio and is a LargeCap Growth fund – Sounds like you’re young and if the fund is performing like you want, you should be good for now (as far as diversification, it is a mutual fund, so it is inherently diversified already!)

#16 Jeremiah – I’m not 100% sure (but maybe 98.28% sure as I’m not a financial guru), but it is based on what you make through the year, so if you’ve contributed $2000 up until June and then your income jumps to a combined 200k yearly, take into account that you will only be making HALF of that 200k in the calendar year (because you’ll only get paid that salary from June-December) so it might fall at around 175k for the year – and if that’s the case, I’d try to offset your MAGI score by dumping MORE into your 401k to be eligible for the ROTH as long as you can – granted, it’s a good problem to have making that kind of $$$, and you can still contribute to a Traditional IRA if you’re forever over that limit –

Hope that helps –
Hank

[...] The GRS Introduction to Roth IRAs series Part 0: How compound returns favor the young Part 1: What is a Roth IRA and why should you care? Part 2: How to start a Roth IRA (and where to do it) Part 3: Which investments are best for a Roth IRA? Part 4: Questions and answers about Roth IRAs [...]

[...] Questions and Answers about Roth IRA’s [...]

If my marginal tax rate had been 10% then a Roth might have been a better deal…once Roths came into being, of course

*Due to nonqualified stock options which are treated as ordinary income…

I’m a US citizen who currently works in another country, and was looking into starting an IRA because my company doesn’t have a contribution-based retirement plan I can use. Does this “US income only” rule apply to Roth IRAs only, or normal IRAs also? Can you also link me to where it says that you must have “US income” to contribute? Poking around Vanguard’s site, it’s not something I’m finding as a requirement, though I know it’s an unusual circumstance.

“Can I really use my Roth IRA to buy a house?”

You CAN purchase real estate within a Roth IRA (or a traditional IRA), but only for investment purposes, meaning it cannot be a residence for you or your immediate family. You also have to find a trustee for this; it’s not that difficult, but definitely more work than just buying Vanguard funds!

[...] Rich Slowly – Questions and Answers about Roth IRAs. JD’s article is a good resource for someone looking for more information about Roth IRAs, [...]