Excess Roth IRA Contribution. -16% unrealized losses. Does this affect the excess withdrawal?
Just found out that my AGI is too high to contribute to a Roth IRA.
It looks like a recharacterization to a Traditional IRA and backdooring into a Roth IRA again may be too much hassle for me since I have some other options on how to use the money.
I'm mainly wondering about how my unrealized losses affect the amount I need to withdraw, if at all.
If I have $1500 in losses, do I only need to withdraw $4000? Or do I need to withdraw $5500 regardless of gains or losses?
Thanks in advance.
Posted Feb 17, 2016, 3:47 AM UTC
22
Net income attributable to a contribution can be a negative value.
So "contribution + net income attributable" -- which is the amount you need to transfer out -- might end up being a value less than your original contribution.
An explicit written out example of this is on wikipedia.
https://en.wikipedia.org/wiki/Net_income_attributable
The example is in fact specifically about an overcontribution to a Roth IRA that has declined in value!
At the bottom of the wikipedia article is a link to a PDF from IRS with examples of calculating net income attributable. One of the examples on page 12 shows a negative NIA. It's a "recharacterization" scenario, but the NIA still applies.
Your NIA is going to depend on your balance. If you only made one contribution and there's nothing else in there, I think it's a straightforward computation. But if you had a Roth balance before you made the $5500 contribution, and all you're trying to do is remove the last contribution you made, then $4000 isn't the answer.