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The cost of not tracking your IRA contributions

The cost of not tracking your IRA contributions

Do you know how much you’re allowed to contribute to your IRA each year? Are you periodically tracking your deposits? Contributing more than the permitted amount can result in costly penalties. Fortunately, there are ways to fix it. How can it happen?  Let’s look at a hypothetical example. In 2016, Ahmad, age 51, set up monthly automatic bank deposits to his traditional IRA that totaled $8,500. However, the IRA contribution limit for 2016 is $5,500, with a catch-up contribution for individuals over 50 of $1,000, for a total of $6,500. Although we believe automatic deposits are the best way to invest for your goals, it’s also an easy way to unintentionally contribute too much to your IRA. You may also end up with an excess contribution if you contribute to a Roth IRA and later discover that your modified adjusted gross income (MAGI) was above the Roth IRA income limit. And because you’re not allowed to deposit money into a traditional IRA for the year you turn 70½ or later, forgetting to turn off automatic deposits or continuing to contribute past that age will also count as excess contributions. Roth IRAs have no age limits for contributions. What can you

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