Can I open up a traditional or roth ira?? Pls help
After my mom passed away, i now have a inherited IRA that i am required to take ” a required minimum distribution.” All the distributions I take from this inherited IRA is taxed and considered income. Can I open a ROTH IRA or a TRADITIONAL IRA or both with the income distributions from my inherited IRA. All or any answers would be greatly appreciated.
Thx again to all..
Ira Spondre
Permalink Submitted by Alan Spross on Tue, 2012-01-10 20:31
You can use the RMD distributions from the inherited IRA to subsidize a regular TIRA or Roth IRA contribution if you are otherwise eligible to make that contribution. You must have earned income in order to qualify to make regular contributions. Again, these would be regular IRA contributions to your own IRA and would not be ROLLOVER contributions since you cannot rollover an RMD of any kind.
Likewise, if you are working and not putting the maximum amount in your 401k, you could increase your contributions and use the RMD money to help you afford to make those additional contributions. Additional 401k contributions of the same amount as your RMD would offset the taxes due on the RMD.
If you are covered by a retirement plan at work, your income may be too high to deduct a TIRA contribution. If you cannot deduct your TIRA contribution, then see if you can make a Roth IRA contribution as the income limit for these is higher than for the TIRA deduction limit.
Permalink Submitted by Ira Spondre on Tue, 2012-01-10 20:54
The only income i have is my distributions from the inherited ira. However, those distributions are considered income and taxed, so is it ok to use that income to open a roth or traditional.
Thx for any help
Permalink Submitted by Alan Spross on Tue, 2012-01-10 21:37
No, you must have earned income in the year the contribution is applied to. Until 4/17/2012, you can still make a contribution for 2011 if you had any earned income in 2011 OR for 2012 if you expect to have any earned income this year. If you are married and your spouse has earned income, you can make a contribution to your IRA as a spousal contribution.
While your RMD is taxable, it does not qualify as earned income, nor does any retirement income such as SS income or pensions.
Permalink Submitted by Ira Spondre on Tue, 2012-01-10 21:55
Is there any other “tax incentive” investment vehicles I could use to invest the RMD’s if the income is not “qualified income” for a roth ira????