What to Do When Your Roth Runneth Over

If you've kicked in more than the allowable limit to your Roth IRA, here's a simple way to ease your tax bite

Q: In January, 2000, my wife and I each invested $2,000 in zero-coupon Treasury bonds for our Roth IRA accounts. A year later, we find that we did better than expected, and our adjusted gross income of $153,000 disqualifies part of our contribution. Is there any option open to us other than liquidating the bonds and withdrawing the excess contribution? -- J.B., New York

A:

With the way things went in the market last year, doing better than you expected puts you ahead of many investors. The Roth IRA, designed to protect aftertax investments from capital gain and interest income taxes, does not hold much appeal for investors facing capital losses. But, since you came out ahead last year, you have reason to keep your Roth IRA. Depending on how you handle the situation, you may not need to sell the bonds -- or take a taxable distribution.

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