{ "media_type": "text", "post_content": "Just got a big raise (50%+) starting July 1st that is going to move me out of income limits for direct Roth IRA contributions (prior to raise was under the limit) even with maxed pretax 401k and HSA - however I am already halfway through contributions ($3000). What options do I have to address these excess contributions?", "post_id": "610386f7343325002f5ac067", "reply_count": 15, "vote_count": 2, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

Just got a big raise (50%+) starting July 1st that is going to move me out of income limits for direct Roth IRA contributions (prior to raise was under the limit) even with maxed pretax 401k and HSA - however I am already halfway through contributions ($3000). What options do I have to address these excess contributions?

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Backdoor Roth

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What did your brokerage tell you when you asked about your options to get the money out of the Roth?

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This happened to me earlier this year. Call your Roth IRA provider - you will have to open a traditional IRA if you don’t already have one. Ask for “recharacterization of contributions from Roth to traditional IRA” and they’ll change it so that everything you contributed so far was as if you contributed it to a traditional IRA. The rest of your contributions this year should go to the traditional IRA up to a max of $6k. Then you should back door Roth it into your Roth IRA.

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It’s two separate calls. It took approx 3 days for the first part and then instant for the second part for me on Schwab

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If it was July 1, I’m assuming it’s PwC, knowing our salaries I don’t think this pushes you over. It’ll be your total income for the year (half of which was prior to the raise) minus any contributions to traditional 401k and HSA

I moved to Strategy& so it was a big bump and definitely puts me over even if I max my 401k and HSA. Also my bonus contributes as well

You can call the 401k provider at your new firm and rollover the Roth to 401k (I *think* this works because I know it’s done for traditional IRA)

To clarify I am talking strictly about IRA. The only way I would involve 401k at all is if they have a traditional Ira balance that would cause problems for a backdoor Roth IRA. They could if allowed roll the traditional balance into their 401k to avoid tax on Roth IRA conversions

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