I Contributed Too Much To An IRA – What Should I Do?

I Contributed Too Much To An IRA – What Should I Do?

Dealing with IRA’s can be a headache at times. That’s why, here at Kiplinger, we have an entire section of our website devoted just to stories involving IRA’s. But we still get lots of questions about retirement, and one of the frequent questions we receive from readers who are saving for retirement is: “I contributed too much to my IRA. What do I do?”

However, before jumping into some of the answers to that question, let’s take a step back and go over some basic information about IRAs and their contribution limits. Once you understand how much is too much when it comes to IRA contributions, you’ll have a better understanding of what can be done if the limits are exceeded.

IRA Basics

An Individual Retirement Account (IRA) is a trust created to save money for retirement or for the owner’s beneficiaries after their death. Traditional IRAs and Roth IRAs are the most commonly used types of IRAs. Both can hold investments without slamming the owner with a tax on earnings or realized gains. This can help anyone amass a larger pot of money for retirement.

Traditional IRAs encourage retirement savings by allowing you to make tax-deductible contributions up to specified limits ($6,000 for 2021, or $7,000 if you’re age 50 or older). Contributions to a traditional IRA, as well as earnings on those contributions, are taxed only upon

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Source: Kiplinger

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