Inadvertant Over-contribution to Roth

[NSRCT]

Please help! I completed my backdoor Roth with Vanguard earlier this month. I contributed exactly $6500 to my traditional IRA, the converted it the next day to my Roth account. Somehow, it "swept" in a dividend of $1.60, so now it looks as though I contributed $6501.60 to my Roth IRA. The money is still sitting in the settlement fund, so should I just transfer the excess back to the traditional IRA, or transfer it to my regular brokerage account? I've been doing this with Vanguard for more than ten years and this is the first time this has occurred. Thanks in advance for any insight.

[jfoxcpacfp]

The $1.60 represents the bit of earnings generated before you converted. Perfectly normal - you did not “over-contribute”. You can convert or leave it there until your next conversion. Some people have been known to make annual non-deductible TIRA contributions and invest for years before realizing they can convert to a Roth. Have a new FWM client with $32k of earnings over a period of many years we just converted (after discussing, of course). I had to explain why they needed to convert now (fortunately in a down market) rather than continuing down this path.

[NSRCT]

Thanks so much for your response to my question. I'll just put the excess $1.60 back into my t-IRA proceed with investing the Roth as planned. Thanks again!

[Tim]

Thanks so much for your response to my question. I'll just put the excess $1.60 back into my t-IRA proceed with investing the Roth as planned. Thanks again!

Misunderstanding here. You contributed $6500, contributions have limitations.
You converted $6501.60, conversions have no limitations.
There is no over contribution to be corrected. Don’t move anything. Invest everything that is in the Roth.

[jfoxcpacfp]

Misunderstanding here. You contributed $6500, contributions have limitations.
You converted $6501.60, conversions have no limitations.
There is no over contribution to be corrected. Don’t move anything. Invest everything that is in the Roth.

Tim, I believe you’ve nailed it, old boy. Still same advice but I skimmed past the “sweep” to the conventional result of earnings from within the TIRA. Really appreciate your careful review!

[Tim]

Tim, I believe you’ve nailed it, old boy. Still same advice but I skimmed past the “sweep” to the conventional result of earnings from within the TIRA. Really appreciate your careful review!

It wasn’t about you. For $1.60, OP was headed to taking money from the Roth and putting it back into the tIRA. That was not your advice. Creating problems where none exist seems counter productive.

I run into this when I try some “easy” home repairs.