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My son is teaching for a year in Mexico. The salary is not great, about $12,000, but it’s a safer way to “see the world” than to join the military so his mom is happy. He wants to start modestly contributing to a retirement fund. This year he earned money in the States before moving to Mexico. Next year, unless he decides to stay for a second year, will be the reverse. He will only earn in Mexico through July, then return home and find a job here. I know there are exclusions for foreign earnings. I know he needs “compensation” here to qualify for an IRA.

Can he open one this year because he has 2007 US earnings? Will he be able to contribute to it monthly in the first half of 2008 on the premise that he will earn wages in the US after his return? What if he does decide to stay another year earning no US wages in 2008? What would then happen to the contributions he made in 2008?

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