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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75872  
Subject: Re: teaching overseas/IRAs Date: 2/19/2001 7:50 AM
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Greetings, Sam, and welcome. You asked:

Maybe someone can help me out with this question. I have been teaching overseas for 4 years (and I plan to continue for 8 more years---then retire at age 60). Since I do not pay US income tax on my earnings (less than the $70,000 allowable), and as I understand it an IRA "is a personal retirement savings plan available to everyone under age 70 1/2 who receives taxable compensation during the year." Since I do not receive "taxable income"---am I eligable for a Roth IRA (or any IRA)---if so, is it a wise investment in my situation?

As Smdiss points out, your use of the foreign income exclusion makes you ineligible for a contribution to a traditional or a Roth IRA. You must have taxable income to contribute to an IRA.

There has been an aggressive approach mentioned by others in your situation wherein you wouldn't exclude all your foreign income from taxation. Instead, you would subject just enough to U.S. income taxes to support an IRA contribution. Because your other deductions would cause that amount to be untaxed anyway, you wouldn't have to worry about income taxes yet you would still have claimed the taxable income necessary to allow an IRA contribution. I have no idea whether that would work or not, but perhaps someone who has used that approach will chime in here to say what happened.

Regards..Pixy
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