pension income with earned income for Roth
client makes 100k from her job.
She also receives a pension income from her ex husband of $32,000.
She got married this year and they filed single.
1. can she fund a Roth IRA up to 6k (over 50)?
or…
2. does the pension income put her over the threshold to fund a Roth?
3. If she files jointly next year with her husband and combined income plus pension is over 200k, would she have to take out the Roth contribution from above is she was allowed or can that stay in for 2021?
Thank you.
Douglas
Permalink Submitted by Alan - IRA critic on Thu, 2021-05-20 19:54
I think you meant they will file MFS (married filing separately) for 2021. She cannot file as single since martial filing status is determined at the end of the year. For that MFS filing status the MAGI for making Roth contributions phases out between 0 and 10,000, therefore neither spouse can make a regular Roth contribution.
If they filed jointly for 2021 instead of MFS, the Roth MAGI phaseout range is 198k-208k . The pension income is included in MAGI and might cause them to exceed the MAGI limit.
If it turns out they do not file jointly or file jointly but MAGI is still too high, they could recharacterize the Roth contributions as TIRA contributions, and for the spouse who does not have other non Roth IRA balance, that spouse could then convert the recharacterized contribution back to Roth, the so called back door Roth strategy.