Slott Report Mailbag: If I Terminate My Employment in January 2013, Can I Contribute to My Roth IRA?

Thursday, December 06, 2012

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

This week’s Slott Report Mailbag looks at Roth contributions and the prerequisites necessary to make a contribution. We also answer a question on investing inherited IRA money in an IRA annuity. As always, we stress the importance of working with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Find one in your area at this link.

1.

If I terminate my employment in January of 2013, can I contribute to my Roth IRA?

Answer:
You can contribute to a Roth IRA next year if you have compensation from employment. If you have no compensation of your own but you are married and your spouse has compensation, you can make a spousal Roth IRA contribution using his/her compensation. In either case, your total income cannot exceed $178,000 for 2013 to make a full Roth IRA contribution.

2.

I converted an IRA to a Roth IRA in December of 2010. I have to pay the final taxes on it this tax year.

I had wages of $23,000.00 this year and plan to make a $6,000.00 contribution this year into my Roth IRA. I am retired and this could be the last year that I have wages. I have heard that other income qualifies for contributions to a Roth IRA.

Is this income stock dividends? Is there any other income that qualifies as income, so I can make a contribution to my Roth IRA in future years?

Any help would be greatly appreciated.

Thanks,
Chuck Hawkins

Answer:
You need compensation to make a Roth IRA contribution. Compensation includes wages, tips, and earned income from self-employment. Stock dividends are not considered compensation.

3.

Dear Ed,

I have run across your articles on the web. I have a question that you may have answered previously. My wife is 57 and is the recipient of a beneficiary IRA worth about $100K from her step-mother, who was already taking distributions. My wife is now taking required minimum distributions (RMDs) each year on her life expectancy. We moved it from her step-mom’s custodian to our investment advisor’s firm and retitled it properly.

It is currently in various mutual funds. Can she invest this into an annuity for purposes of gaining a fixed income and reducing stock market risk?

Many thanks for your advice and commentary,

Best regards,
Andy Field

Answer:
Yes. She can invest the inherited IRA money in an IRA annuity, which is sometimes called a qualified annuity. She will have to continue taking death distributions from that inherited IRA annuity.
 

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