Can I fund next year's traditional IRA contribution with cash in the mm account in that IRA?

Forum|Forum|4 years ago
September 15, 2021
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I recently sold some holdings in my traditional IRA account that are underperforming. I have enough cash in the IRA now where I could fund 2022 Contribution. Can I use some of that cash to fund my 2022 contribution without penalty? or taxes (ie it being treated as a withdrawal). I will be 68 at the end of this year, so we're not talking about 59 1/2 or RMDs (which is all I can find online... I'd say, 80% of info on IRAs is about early w/d and RMDs)

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Best answer by VolvoGirl

No, of course not. It's already in the IRA. I really didn't follow what you are trying to do. What would be the point? Are you trying to get a tax deduction for it?

You can only contribute to a IRA from earned income like from W2 or self employment income. From personal money outside your IRA.

VolvoGirlAnswer

No, of course not. It's already in the IRA. I really didn't follow what you are trying to do. What would be the point? Are you trying to get a tax deduction for it?

You can only contribute to a IRA from earned income like from W2 or self employment income. From personal money outside your IRA.

TuckerdogAVLAuthor

Well, since the cash was already there I was thinking, Okay this would be simple since the account has a button that says "You haven't contributed for next year yet. Click here." 🙂 I didn't think it made sense which is why I've been trying to get an answer to this question for the last hour. Yes or No is often the most difficult thing to get online. Thank you for your quick response. However, on a side note, I could take the cash out, have it count as income to be taxed at whatever my tax rate is, and then put it back in though, correct?

VolvoGirl

I guess so if you have enough earned income to make a contribution. It doesn't matter what account (non-IRA account) you use to fund a new Contribution. But that really doesn't make sense to take a withdrawal and pay tax on it just to turn around and send it back as a contribution. Are you still working?