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My husband, age 56, receives a fed. retirement annuity, and also had some separate self-employment income at end of l998. Can he contribute to an IRA or Roth IRA only with income from the self-employment income? This income was less than 2K ......
Can you use income from a pension to contribute to an IRA?

thanks.

meowiz
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Meowiz: I am no expert, but have always understood that one need "earned" income in order to contribute to an IRA (Roth or otherwise); I believe that a retirment annuity is not considered earned income and therefore does not support an IRA contribution. Of course, money is fungible so the dollars from the retirement annuity could be placed in the IRA, but could not be used for purposes of calculating how many dollars could be contributed. Hope this helps, but I suspect you alreqdy knew the answer. Good Luck, JAFO
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Meowiz: I am no expert, but have always understood that one need "earned"
income in order to contribute to an IRA (Roth or otherwise); I believe that a
retirment annuity is not considered earned income and therefore does not
support an IRA contribution.


Thanks JAFO31,

This is what I thought. Now another question came to mind. I've read that if one spouse is not working, the other one may contribute to an IRA for them, for a total of max. 4K between the two IRA's. Can I contribute toward my husband's IRA for max of 4K between our two IRA's for one year, even though he is receiving self-employment income and is not technically unemployed. Like you said earlier, money is fungible, whatever that means?!...like a fungus? ;-)....anyway, since it's 'our' money, can my income be used toward his 2K max? thanks. meowiz
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Meowiz:
<<Like
you said earlier, money is fungible, whatever that means?!...like a fungus? ;-)>>

Fungible: 1. (esp. of goods) being of such nature or kind as to be freely exchangeable or replaceable for another of like nature or kind. ;-)

<<I've read that if one spouse is not
working, the other one may contribute to an IRA for them, for a total of max. 4K between the two
IRA's. Can I contribute toward my husband's IRA for max of 4K between our two IRA's for one
year, even though he is receiving self-employment income and is not technically unemployed.<<snip>> ....anyway, since it's 'our' money, can my income be used toward his 2K max? >>

Exactly right. As long as you two have $4K in earned income, you can each max out your IRA contribution to the tune of $2K apiece. If you fall short, you can divvy up the contribution however you like, as long as the grand total doesn't exceed your earned income. Your Uncle doesn't care where the actual contribution came from, just that you "earned" enough to qualify. (That's the fungible part). IOW, if your child earns $2K bagging groceries one summer, you may contribute $2k to her IRA even though she blew all her salary on Def Leppard tickets and Clearasil.

Chris
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Meowiz: I am glad that SnootFool jumped in because your second question was above my meager talents. Also, SnootFool included the formal definition, but my informal working definition is that on a day to day basis, one dollar looks pretty much like any other dollar and spens just as well, but be sure that you you can justify yourself to the revenue service because they don't agree that all income dollars are the same. Good Luck, JAFO
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Meowiz asked:

<<My husband, age 56, receives a fed. retirement annuity, and also had some separate self-employment income at end of l998. Can he contribute to an IRA or Roth IRA only with income from the self-employment income? This income was less than 2K ......
Can you use income from a pension to contribute to an IRA? >>


To JAFO's fine response to that question, she then asked:

<<I've read that if one spouse is not working, the other one may contribute to an IRA for them, for a total of max. 4K between the two IRA's. Can I contribute toward my husband's IRA for max of 4K between our two IRA's for one year, even though he is receiving self-employment income and is not technically unemployed.<<snip>> ....anyway, since it's 'our' money, can my income be used toward his 2K max? >>

Chris (aka SnootFool) handled that one. You now know that contributions to any IRA must come from earned compensation (i.e., income from employment) and that a retirement annuity doesn't count as compensation for that purpose. You also know that as long as one of you has at least $4K in earned compensation, then both of you may contribute up to $2K each to your own IRAs. Depending on AGI limitations and coverage by SEP/Keogh/SIMPLE for both of you, those contributions may or may not be deductible if made to a traditional IRA. They will not be deductible if made to a Roth IRA, but that, too, has AGI limits. Regardless, both of you can use the nondeductible traditional IRA. See IRS Publication 590, Individual Retirement Arrangements, for details. That can be found at www.irs.gov . Alternatively, you can see my IRA discussion in the Foolish Retirement Plan Primer at http://www.fool.com/Retirement/Retirement.htm .

Regards…..Pixy
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