Roth IRA Contribution Rules for Seniors Not Working

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Unlike a traditional individual retirement account, you can continue contributing to a Roth IRA as long as you live. However, Internal Revenue Service rules require that your IRA contribution not exceed what the agency terms your "compensation income," generally money you earn from a job or self-employment. If you don't have a job, you may be able to contribute to a Roth IRA if you receive alimony or if your spouse has compensation income.

Compensation Income

The IRS defines compensation income as salary or wages you earn at a job, as well as commission and tips. In addition, self-employment income, either that you earn as an independent contractor or as a small-business owner, is considered compensation. Those in the military can include nontaxable combat pay and military differential pay, and alimony is also compensation income.

Non-compensation Income

For the purposes of calculating your allowable Roth IRA contribution, you cannot include pension income and distributions from other employer-sponsored plans like a 401(k) or SIMPLE IRAs. Interest and dividend payments from stocks and other financial products are off-limits. You cannot include income you receive from investment properties, such as rent or profit from the sale of a home or building.

Calculating Your Contribution

As of 2011, you are allowed to contribute up to $6,000 to a Roth IRA if you are 50 or older or your total compensation income, whichever amount is smaller. To figure out how much you can contribute, add up any taxable income you received, assuming you did not earn nontaxable combat pay. If you have alimony, include that. Perhaps you did not have a job but did earn money as a consultant or independent contractor. You can include those amounts, as well. If the total is less than $6,000, it is the amount you are allowed to contribute to your Roth IRA.

Spousal Contributions

Perhaps you received nothing that the IRS considers compensation income but are married and file jointly with a spouse who does receive compensation income. The IRS will allow you to make what is known a spousal IRA contribution as long as you and your spouse's total Roth and traditional IRA contributions do not exceed her compensation income. For example: John is 60, retired and married to Jane, also 60, who earns $60,000 a year in salary. Both partners can make the maximum Roth IRA contribution because the total amount they could contribute, $12,000, does not exceed Jane's income of $60,000.

Time Frame

You have until your filing deadline, including extensions, to make a Roth IRA contribution and apply it to the previous year. For example, if you had a part-time job in 2011 and earned $3,000 but have no employment in 2012, you can contribute to a Roth IRA until April 15, 2012, assuming that is your deadline, and apply it to 2011. If you took a standard six-month extension, you would have until Oct. 15, 2012, to apply a Roth IRA contribution to 2011.

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