Now that I have detailed the mistakes I typically see, you are hopefully not going to make them in 2023.
But if you’ve already made them, there are a couple of ways to fix them, but work with your financial advisor, and your CPA to figure out the best solution for your situation. The fixes will depend on the mistake, but also when you made the mistake.
If you’ve made illegal contributions (that’s what IRS calls them) – you might be able to recharacterize them as traditional IRAS. Otherwise, you might have to remove those contributions. Every year the money remains in the account, and there is a 6% penalty. But if you remove the money by October 15th after the year it was made, SECURE Act 2 has changed the rules, so you won’t be penalized.
If you’ve messed with the Pro-rata rule and did not include the extra income, you might have to amend your prior years’ returns, to account for the extra income.
The Roth IRA is a great tool, make the most of it, and you have a shot not only at improving your future but also creating and passing on generational wealth.