Is it possible: IRA Contributions in same year as taking distribution?

Submitted by Larry DuLude on Wed, 2017-12-27 16:49

I am nearing retirement (age 68), still on W2, my wife is not employed. My W2 will be
$12000 for 2017. I have been in the habit of funding both our Roths using distribution
from my IRA. In March of 2017, I took a distribution from my IRA ($15k)and used the
proceeds to fund my Roth and my wife’s Roth ($6500 each, $2k went to pay bills).

I now find that my Adjusted Gross is higher than I anticipated. I plan to:
1) Contribute $6500 to Spousal IRA; does this have to be a separate IRA account or can I
just deposit the funds to my wife’s current IRA?

2) I would like to contribute to my own IRA as a way to further reduce our Adjusted Gross
(I assume maximum of $5500 given my W2 wage income). Is this still possible given that I
already took a distribution from this same account?

Thanks for your help,



Submitted by Alan - IRA critic on Wed, 2017-12-27 18:46

  • Usually, the transactions you are doing is done by a conversion. Instead, it sounds like you have been taking a taxable distribution from the TIRA and using it to fund new regular contributions to your Roth IRAs instead of a conversion. That’s OK, just somewhat unusual. For a conversion there is no income limit, but for a regular Roth contribution there is and it sounds like your modified AGI is over the limit. Be sure you are using the correct figure for MAGI. In addition, regular contributions cannot exceed your earned income, which is apparently 12,000. Therefore, you have excess contributions of 500 each for sure, and possibly more depending on how much your MAGI exceeds 186,000. Also, it sounds like you already funded the Roth accounts in March, but are thinking about funding them again?  You cannot do that.
  • A spousal IRA contribution does not have to go into a new account. You can make it into your spouse’s existing Roth (if eligible for the contribution).
  • Please clarify some of the above issues. I am not sure what you have already done (for what year the March contributions were for, etc. Is your MAGI over 186,000 even with only 12,000 of W 2 income?  You can make a contribution whether you take a distribution or not as long as it is not an excess contribution.

Submitted by Larry DuLude on Thu, 2017-12-28 01:39

i will try to clear up some of my muddied post.  I understand about the usual conversion, just some details about the accounts and timing caused me to do this in 2 transactions.  Funding for 2016 Roths was from a 2017 distribution just prior to filing 2016 taxes (March 2017).  So, as I now look at 2017 tax filing, AGI will be higher than I would like….I’m not I’m hitting the limit (MAGI is no where near 186k), I just want to lower AGI to reduce taxes.  So I am considering a 2017 spousal IRA, basing it on my W2 income (I am not covered by a workplace retirement plan).  I would plan to use cash to fund the spousal IRA, no IRA distribution.You answered the question re: spousal IRA contribution does not have to go into a new account, which I appreciate.Thank you for your post.

Submitted by Alan - IRA critic on Thu, 2017-12-28 02:11

OK, that makes sense. You can make a total of 12,000 in deductible TIRA contributions between your IRA and spouse’s IRA for 2017, with a maximum of 6500 for any one spouse (include 1,000 catch up contribution for age 50+).

Submitted by Larry DuLude on Thu, 2017-12-28 15:25

Thank you Alan, much appreciate your information.  all the best for the New Year

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