Hi all,
I recognize this is likely a dumb question, but I haven't been able to form the right search query to find the answer. I started this year with a base salary of $110,000. Some time between March and May I was bumped to $150,000 base, and in July or August I was bumped to $180,000 base. I receive a quarterly variable comp bonus of max 10% my salary. Given that, I'm not sure what my actual total gross income will be. In the two years I've been with my employer, the bonus has never been 100% due to it being based off global company OKRs plus team OKRs, so the word "variable" is true to its definition.
Now for the problem I may or may not have. I set up a Roth IRA with Fidelity in February knowing that I was just under the cap for a head of household to pay into one. I continued to contribute $500 per paycheck to the sum of $3,500 when I got my latest raise. That's when I panicked and stopped contributing, because I really don't want to get dinged any more than I already due by the IRS. This brings me to the title of this post; the question.
Are Roth IRA contribution limits based on actual earned income or based on what an individual's salary is? Secondly, if someone smarter than I is able to rough math it, and the former is the case, am I looking at potential penalties for using a tax advantaged investment account due to being outside the income limits?
Writing that out seems to answer the question, but given the iterations I've received these pay increases I'm not sure how to determine what my gross earnings will be this tax year and whether or not I should (a) do a return of contributions, (b) have Fidelity do a conversion then do a backdoor IRA, or (c) max out the $6k at the end of December and then figure out what the next investment vehicle will be.
Any input would be greatly appreciated!
Submitted November 03, 2022 at 11:33PM by grimm_ninja https://ift.tt/B58Sgmi
