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The Painful Lesson of Over Funding Your IRA

Overfunding an IRA is one of the most common, and costly retirement mistakes we see. In this video, we break down how IRA contribution limits actually work and what happens when they’re miscalculated. Key points covered: 2024–2025 contribution limits: Traditional IRA: $7,000 Roth IRA: $7,000 SEP IRA: Up to $56,000 or 25% of W-2 wages (whichever is lower) Why K-1 income does NOT count toward SEP IRA contribution calculations How one S-corp owner accidentally overfunded by $15,000+ The three ways to fix an IRA overcontribution: Withdraw the excess (with taxes + penalties) Apply the overage to a future year Self-report to the IRS (fees, paperwork, and recurring penalties) We also explain why “doing the right thing” from a compliance standpoint can sometimes be the most expensive option, and why proactive planning matters. If you’re contributing to retirement accounts through an S-corp or SEP IRA, the details matter, and small miscalculations can snowball quickly causing you trouble. #rothira #sepira #retirementplanning #taxplanning #wealthbuilding #personalfinancetips #cpainsights #irscompliance