Am I considered working?

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tundratoy
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Joined: Sat Jan 20, 2018 10:02 am

Am I considered working?

Post by tundratoy »

I took an early retirement package from my employer. I am 64 years old and I receive $ 1,800.00 a month for the next three years. My question is can I make contributions to my Roth? since I am receiving a monthly pay from my employer but I am not technically working.
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cheese_breath
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Re: Am I considered working?

Post by cheese_breath »

Probably not. If you're getting this money as part of your retirement package you'll probably receive a 1099R at the end of the year. That's not earned income.
The surest way to know the future is when it becomes the past.
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JoMoney
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Re: Am I considered working?

Post by JoMoney »

You need earned income.
If the tax form you get for this income is 1099-R (typical for retirement plan income) , no, you probably can't contribute to roth.
If you get a W-2, from wages, possibly you can.
Are you paying social security/OASDI on this income? If not, probably another indication this isn't earned income.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Miriam2
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Re: Am I considered working?

Post by Miriam2 »

What does your employer or HR department say about this? In your paperwork, is there a FAQS sheet?
Is this a DROP (Deferred Retirement Option)?
What happens with your early retirement package after 3 years?
Perhaps a 1099-MISC would be considered "income."
Beehave
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Re: Am I considered working?

Post by Beehave »

You can contribute to your IRA if the post-employment pay is severance pay. That's because Social Security and Medicare are deducted from severance, so it is considered income, and therefore you can contribute to an IRA. As I understand it, the severance cannot go into a 401k (since you are no longer employed by that employer).

Pension and annuity income do not create eligibility for IRA contributions. No Social Security is deducted from these payments.

Here are some sources to help distinguish between "end-of-employment" funds that are and are not eligible for IRA contributions (Note: I'm neither an accountant nor an attorney, and also, it would be good to consult with a qualified expert if in doubt after researching):

https://pocketsense.com/can-pay-used-ir ... 05741.html

https://budgeting.thenest.com/severance ... 21111.html

(Edited by author for clarification)
McDougal
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Re: Am I considered working?

Post by McDougal »

If you have a spouse, and if he/she is working, can't you have a spousal Roth IRA?
Topic Author
tundratoy
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Joined: Sat Jan 20, 2018 10:02 am

Re: Am I considered working?

Post by tundratoy »

Thank you so much for your assistance. I am paying OASDI/EE on each of my paychecks to this point, and yes my wife is working, this is her last year. So I believe I am working up until this point. Thanks for your expertise, much appreciated!
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cheese_breath
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Re: Am I considered working?

Post by cheese_breath »

tundratoy wrote: Mon Jun 28, 2021 7:32 am Thank you so much for your assistance. I am paying OASDI/EE on each of my paychecks to this point...
So they're taking a Social Security deduction but no Medicare deduction? It might not hurt to call SSA to see what they're depositing into your account. I think if they're withholding Social Security they're supposed to match your contribution.
The surest way to know the future is when it becomes the past.
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