Ep 42 Dont Make This Expensive Retirement Saving Mistake
Ep 42 Dont Make This Expensive Retirement Saving Mistake
I have a client that engaged me to provide tax planning ideas so they can save taxes. Their current financial advisor does not provide tax planning as an offering, so they wanted someone who does, so they engaged me for this service.
Upon gathering information, I learned that the husband is contributing to a Roth IRA. Generally that is a good thing, but if you make more than $228,000 (married filing jointly) in 2023 you don't qualify to contribute to a Roth IRA. This family does not qualify.
The IRS levies a penalty of 6% for each year that you do not fix a Roth IRA contribution when you aren't eligible to make one. In order to fix this issue, you must take out the money and pay taxes on the growth. If you didn't remedy it by the filing date of the year in question, you are subject to the 6% penalty as well. Each year you don't fix the issue costs you another 6%. For example: If you put $1,000 into your Roth IRA and didn't fix it you would owe $60. If you didn't fix it the next year you pay another $60 and that penalty continues for up to 6 years. You also need to pay taxes on the growth because you would have been subject to tax on the gains realized if you had invested in a taxable account.
If you need help with this issue or any other financial planning needs, feel free to contact Red Barn Financial at 615-619-6919 or email Sean Moran as smoran@redbarnfinancial.com. You can also learn more about Red Barn Financial at www.redbarnfinancial.com
Disclaimer: The information contained in this podcast is for informational purposes only. It is not tax, legal or financial advice. Information is considered accurate at the time of recording, but any changes in tax or financial law may impact the content. It is the listener's responsibility to make sure they understand and agree with the information or reach out to a financial or tax advisor to understand their situation.
roth ira, retirement planning, financial advisor