Moronic Monday Thread for the week of August 29, 2016

it seems like I'm over the income limit for Roth, which is why I picked Traditional.

If you're over the income limit to make a direct contribution to Roth IRA, then you're also over the income limit to deduct your traditional IRA contribution, so your contribution to trad IRA will not be deducted from your taxable income this year. You could take the second step of "back-door" Roth strategy and convert the money in your trad IRA to Roth IRA. If there's no growth while it was in the trad IRA, no tax on this conversion (since the money is already being taxed).

If you leave the nondeductible money in the trad IRA, that's okay, but your growth is going to be taxable. If you convert it to Roth IRA, the growth in future there will not be taxable.

You keep track of the nondeductible contributions using Form 8606, so eventually when you take money out you won't get "double" taxed. If you really did make a trad IRA contribution and your income really is too high for direct Roth IRA contribution, make sure you fill out Form 8606 to indicate the nondeductible amount, to avoid being doubly taxed in future.

/r/personalfinance Thread Parent