Low Earned Income Roth contribution
I retired in 2009 and will have no earned income in 2010. My spouse will retire early in 2010 and have earned income of about $2000 for the year.
Can my spouse make a 2010 Roth contribution of $2000 (equal to her earned income) or $3000 (earned income plus $1000 catch up contribution)?
In either case, can I make a spousal Roth IRA contribution equal to hers?
Thanks!
Permalink Submitted by Alan Spross on Wed, 2010-01-06 23:18
You can only make regular IRA contributions up to the extent of your earned income as a couple. Catchup contributions also must come from different earned income than the regular contributions. Therefore, a contribution of 2,000 is the most that you can make combined.
Note that you may be able to qualify for the Retirement Savings Contribution Credit, frequently known as the Saver’s Credit. By looking into the income tiers in the Inst for Form 8880, you can determine whether doing a Roth conversion in 2010 would help you increase your income into the 50% credit tier. If so, you could get a credit of $1,000 for making a contribution of 2,000. However, there are several details to be considered such as a reduction if either of you took retirement plan distributions in the last 3 years. But if you manage all the variables to your advantage, you could actually do a Roth conversion and the tax bill would be covered by this credit. Check it out.