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Thursday | May 22nd >

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The fix for a frequent client mistake: Ineligible IRA contributions

By Tim Kramer

In order to contribute to any IRA you need to qualify. You must have compensation of wages or self-employment. Due to a new law recharacterization of ROTH conversions is not an option but you can recharacterize IRA contributions. Recharacterizations of either a ROTH or a Traditional IRA must be valid in their own right. If a rollover was accidentally put into the wrong IRA a recharacterization would be necessary. Another example of recharacterization from a Roth IRA to a traditional IRA is if your income did not qualify for a ROTH IRA.

Key Takeaways:

  • Financial experts often see too many people untoward or ineligible IRA contributions.
  • To qualify for the IRA contribution, one must have steady income and file it by April 15.
  • In addition, people should not have a limits on their income and can’t be older than 70 1/2.

“Keep in mind that re-characterizations can be done for reasons large or small, including clients who simply change their mind about their retirement savings strategy.”

Read more: https://www.financial-planning.com/news/correct-ineligible-or-unwanted-contributions-to-roth-iras-or-traditional-iras

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