I made a mistake... what now?

[riverwed070707]

Was reading a retirement thread and had the sudden realization that I've been continuing to contribute to DH's Roth all year but he hasn't had any taxable income this year... what do I do? Am I going to be penalized? Can I withdraw the contributions? No idea why this didn't cross my mind sooner. Its an automatic payment every month and I really just didn't think about it. He's been tossing around the idea of getting a part time seasonal job -- how much does he have to work to qualify? If he works the last two months of the year, does that make him eligible to contribute for the whole year?

[kork13]

It should be no problem at all. I assume you are still employed? As long as one spouse is employed and has qualifying earned income, you can contribute to an IRA for each spouse, regardless of (in this case) your husband's employment status. 100% legit.

If NEITHER of you are currently employed, I think that does raise an issue. Contact the company that holds your husband's IRA, and they will be the best ones to advise you. However, especially because it's a Roth IRA, you *should* be able to simply withdraw the unqualified amount, and you should have no penalty or tax. Remember, Roth IRA's allow you to withdraw contributions without tax or penalty at any time.

........and of course, anyone smarter than me, please correct me if I'm wrong. I'm not totally on top of the taxes side of finances.

[ktmarvels]

He doesn't need to have income, as long as you do. It's called a spousal IRA. When I was in school that's how we worked it. Also if he has ANY income during the year he qualifies up to the amount he makes. Hope this helps.
Katy

[riverwed070707]

It should be no problem at all. I assume you are still employed? As long as one spouse is employed and has qualifying earned income, you can contribute to an IRA for each spouse, regardless of (in this case) your husband's employment status. 100% legit.

If NEITHER of you are currently employed, I think that does raise an issue. Contact the company that holds your husband's IRA, and they will be the best ones to advise you. However, especially because it's a Roth IRA, you *should* be able to simply withdraw the unqualified amount, and you should have no penalty or tax. Remember, Roth IRA's allow you to withdraw contributions without tax or penalty at any time.

........and of course, anyone smarter than me, please correct me if I'm wrong. I'm not totally on top of the taxes side of finances.

Interesting. So I opened a regular Roth through Fidelity when he was working. This same account can just count as spousal or is it a separate special type of account?

I am employed, so no issues there. But I did wonder about withdrawing it -- isn't there a bit of a hole in the system because my current ROI is at something crazy like 23%. If I contributed inelibible funds and just withdrew them later that year, do I still keep the interest? This isn't my plan if I can keep his funds in there, just curious how that works.

[disneysteve]

Interesting. So I opened a regular Roth through Fidelity when he was working. This same account can just count as spousal or is it a separate special type of account?

No special account needed for a spousal IRA. He can fund it with his own income or you can fund it from your income. Doesn't matter.

[Petunia 100]

Just a tidbit of info in case it applies to anyone: a non-working spouse can contribute to an IRA with income earned by the other spouse provided they file MFJ. If you choose to file MFS, then each spouse must have their own earned income to make IRA contributions.

[kork13]

But I did wonder about withdrawing it -- isn't there a bit of a hole in the system because my current ROI is at something crazy like 23%. If I contributed inelibible funds and just withdrew them later that year, do I still keep the interest? This isn't my plan if I can keep his funds in there, just curious how that works.

True. You would probably have to withdraw the earnings that could be attributed to your ineligible funds, and be penalized on that part of the withdrawal. It's for those circumstances that the best idea would be to call the company holding your account to clarify the requirements and determine how to meet them.

Just a tidbit of info in case it applies to anyone: a non-working spouse can contribute to an IRA with income earned by the other spouse provided they file MFJ. If you choose to file MFS, then each spouse must have their own earned income to make IRA contributions.

Good point, and an important one that I overlooked.

[KTP]

This is how it worked for us in the past. I was not working (student) and my wife had income so we both were able to contribute to a Roth.

Then she went and started making too much money so now I can't contribute to a Roth

(yes I know about the backdoor method, but I have a existing IRA with little basis)

[romavia]

Every country has its own laws regarding taxes. If the thing is falling in the criteria of illegality then I don't think to go with it.

[ideasonfinancing]

Keep it calm. You better talk to the company that holds the IRA for you. They are the best people to talk to.

Base on my experience, it cannot be cancelled that easily. You can always get a chance to get the money that you contributed but it will surely take a long process.