Wages, salaries, tips, professional fees, bonuses). That leaves many other sources of income that DON'T qualify. For example, items you find on a 1099-INT or 1099-DIV, such as interest income and dividends from stocks or other investments, don't qualify. Rental income and capital gains from the sale of investments or properties are not counted.
Additionally, transferring 401k to Gold IRA does not qualify as a source of income. Neither do pension payments, profit sharing, IRA distributions, or distributions from retirement accounts or annuities. If you have any questions for Dan, send him an email with “MarketWatch Q&A” in the subject line. Visit a quote page and the recently viewed tickets will be displayed here. There are no mandatory minimum distributions after traditional IRA funds are converted to Roth IRA funds.
We'll also look at an option for spouses who don't have earned income but still want to contribute to Roth IRAs. Several types of income are not considered earned income for the purposes of contributing to a Roth IRA. If the spouse with no income returns to work later, they can still contribute to their current spousal IRA. This so-called spousal IRA is just like any other Roth IRA, except that it's your spouse's income that determines whether you qualify for a Roth IRA based on maximum income limits.
Roths can also provide valuable tax diversification during retirement and can be a great way to balance other sources of income, such as withdrawals from a 401 (k) or Roth IRA and Social Security payments. Keep in mind that a spousal Roth IRA allows a working spouse to contribute to a Roth for a non-working spouse as long as all other eligibility requirements are met. Yes, you can contribute to an IRA for your unemployed, non-working spouse who files a joint return, but your combined total contribution cannot exceed your combined taxable income or double the annual IRA limit, whichever is less. Unlike contributions to a traditional IRA, which may be tax-deductible, a Roth IRA has no initial tax relief.
Minors can contribute to an IRA based only on their own earned income limits and not those of their parents. Finally, keep in mind that if you invest in both a Roth IRA and a traditional IRA, the total amount of money you contribute to both accounts cannot exceed the annual limit. The penalty for leaving an excess contribution in an IRA or Roth IRA is 6% of the deductible for each year the excess remains in the account. Even if you don't have a conventional job, you may be able to contribute to a Roth IRA with income earned from unconventional sources if you don't earn more than the income limits imposed by the IRS.
Usually, that means you need paid work for someone else or for your own company to make contributions to the Roth IRA. If your spouse earns income but you don't, the IRS allows you to have your own IRA and use family funds to make your annual contributions. For those whose earnings exceed the limits of a maximum contribution, the IRS provides a worksheet to help determine how much they can contribute to a Roth IRA.