IRA eligibility
My client who is self-employed wants to contribute to a Traditional IRA; he has not been eligible in the past due to his high income and the fact that his wife a teacher wac a participant in a pension plan. She has sinced retired, is collecting a pension and does part time work (she earned less than $6,000.00 in 2010) my question, is he now eligible to contribute to the IRA (I believe he is) and can she contribute to a spousal IRA if she continues to earn less than the $6,000.00 maximum even though she collects the pension? He does not want to use a SEP or a SIMPLE even though the limits are higher.
Permalink Submitted by Jose Morales on Thu, 2011-04-28 17:12
The contribution eligibility requirements for a Traditional IRA are 1) the individual has earned income and 2) the individual has not attained the year in which they reach the age of 70 1/2. To make a spousal contribution they must have enough earned income to cover the contribution amount made for the both of them, in aggregate.
Being an active participant in an employer sponsored plan only reduces or eliminates an individual’s ability to deduct their Traditional IRA contributions for tax purposes.
Permalink Submitted by Herb Montgomery on Thu, 2011-04-28 18:13
I am aware of all that you stated; my uncertainty is whether the spouse who is collecting a pension and no longer contributing to it is considered an active participant.
Permalink Submitted by Alan Spross on Thu, 2011-04-28 18:20
She is not an active participant if she is retired for the entire year and collecting a pension.