I'm 54, working part-time, and my partner's income covers our current needs. I'm putting 100% of my salary away in a 403b (it won't even hit the $20,500 max). I also have some inherited annuities that I need to cash in, which will give me about $15K taxable income. Since I'm not taking anything home from my job, can I put any of the net from these annuities into a Roth IRA? ie: does one have to have actual payroll- earned income to put into a Roth?
thanks much
An IRA (Roth or Traditional) require you to have taxable compensation. This includes pay for your services (basically the amount in Box 1 of your W-2) as an employee as well as self-employment income (net earnings less the deduction for retirement plan contributions less the deduction for 1/2 self-employment taxes). In addition, alimony and nontaxable combat pay may also qualify you to make an IRA contribution.
"Melinda Simon" wrote
You're not putting "all" of your salary in a 403(b) if there is any taken out for Social Security or Medicare. You may be thinking of the net amount perhaps? Is there any net check to you at all?
In any event, Alan responded to your question. You have to have some taxable - earned - income showing in Box 1 of your W-2 to even begin.
If you and your partner are legally married and file a joint return, then there's a chance you may be able to contribute based on his/her W2 income. The money from the annuity can be used to pay for living expenses, which would leave more W2 income left over, which would allow you both to maximize the amount you put into a Roth -- which looks to be 12k in 2008, 6k for each of you if you are both over 50.
Paul,
thanks. just so I understand: you're right, there will be SS, etc. deducted from my gross, so it's 100% of my pre-tax net that will go into my 403b. and you're saying that since that will not show any remaining take-home, taxable income, I can't put any of the proceeds of the annuity into either a standard IRA or a Roth. so the only way to put it aside is in a traditional (investment, CD, bank, etc.) account. do I have that all right?
thanks again.
Melinda
"Melinda Simon" wrote
Then not all your gross income goes into the 403(b). That difference.....the amount of tax withheld basically.....is the amount of any additional earned ~taxable~ income you have. So it's possible, but not any greater than the amount of social security and/or medicare withheld from your gross.
Your situation looks like this:
Gross wages less Social Security less Medicare less 403(b)
------------------------ no net pay.
Is that about it?
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.