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Earned Income and Roth IRA limit
Old 08-12-2016, 04:51 PM   #1
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Earned Income and Roth IRA limit

I know that you can not contribute more than your earned income in Roth IRA. But what happens for following situation:

- Marrried, DH-53 DW-47
- DW's earned Income: About 6000/year
- DH's earned Income: 0 (Retired)

I think DW will be able to contribute full 5500 in her Roth IRA. But what about DH?

- Can DH also contribute 6500(with Catch Up Contri) in his Roth IRA?
- Does wife's Earned Income need to be >= 12000 in this case to make full Roth IRA contribution for both?
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Old 08-12-2016, 05:55 PM   #2
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I was wrong

The limit is the earnings when the income is below the total of allowed contributions, You can split it up but with $6,000 earnings , the total limit is $5,500 and $500 up to the earnings limit but not ( $5,500 + $5,500 ).

Note: the irs does not consider the earnings to be the number they use, I think they use the MAGI, which could end up being the same number or close.

I had to look it up and it is tricky to find, and the irs site didn't help, but this site had a good explanation.
http://fairmark.com/retirement/roth-...usal-roth-ira/

Special rule for spouses

If you’re married and you file a joint return, you can make a regular contribution to a Roth IRA even if you have little or no qualifying income. Solely for the purpose of determining how much you can contribute to an IRA, you’ll be treated as if you had taxable compensation income equal to:
  • Your qualifying income (if any), plus
  • Your spouse’s qualifying income (if any), minus
  • Your spouse’s regular contributions to traditional IRAs and Roth IRAs.
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Old 08-12-2016, 06:11 PM   #3
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Quote:
Originally Posted by retire2020 View Post
I know that you can not contribute more than your earned income in Roth IRA. But what happens for following situation:

- Marrried, DH-53 DW-47
- DW's earned Income: About 6000/year
- DH's earned Income: 0 (Retired)

I think DW will be able to contribute full 5500 in her Roth IRA. But what about DH?

- Can he also contribute 6500(with Catch Up Contri) in his Roth IRA?
- Does wife's Earned Income need to be >= 12000 in this case to make full Roth IRA contribution for both?
I would think that the Roth contributions in total can not exceed the earned income, full stop. I have not looked at the tax forms to see what else might be involved.
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Old 08-12-2016, 06:21 PM   #4
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DW can make a spousal contribution to DH's Roth IRA, so between them, they can save the entire $6K. They cannot contribute more than than their combined earned income ($6K), and DW cannot contribute more than $5500 to her account since she is not allowed to make a catch-up contribution. Otherwise, they can divide the $6K between the accounts however they'd like.
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Old 08-12-2016, 06:34 PM   #5
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Quote:
Originally Posted by cathy63 View Post
DW can make a spousal contribution to DH's Roth IRA, so between them, they can save the entire $6K. They cannot contribute more than than their combined earned income ($6K), and DW cannot contribute more than $5500 to her account since she is not allowed to make a catch-up contribution. Otherwise, they can divide the $6K between the accounts however they'd like.
You are right, my comment is misleading, so I'm going to fix it.
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Old 08-12-2016, 06:45 PM   #6
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Thank you all. This definitely clears my doubts! We'll need to have at least 12K earned income to take full advantage of Roth IRA.
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