The free posts this week explained what makes a contribution excess, why custodians do not catch it, and the moment it becomes a problem. This one tells you how to fix it. Step by step, with the formula, the forms, and the phone call to your custodian.
Step 1: Confirm the excess amount.
Before you fix anything, you need to know exactly how much is excess. This is not always the full contribution.
If you exceeded the dollar limit, the excess is the amount over the limit. You contributed $9,000 and the limit is $7,500. Excess: $1,500.
If your Roth contribution was reduced by the MAGI phase-out, the excess is the amount over your reduced limit. You contributed $7,500 but your allowable contribution based on MAGI was $3,000. Excess: $4,500.
If you had no earned income, the excess is the amount over your earned income. You contributed $7,500 but earned only $2,000. Excess: $5,500.
If you contributed to both a Traditional and Roth IRA and the combined total exceeds the limit, the excess is the overage. You put $4,000 in a Traditional and $5,000 in a Roth. Total: $9,000. Limit: $7,500. Excess: $1,500. You choose which account to remove it from.
I write one of these every day, one retirement rule, explained in plain language and verified against the source. The daily email is free: subscribe here.