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Retirement accounts for students/unemployed?
Old 02-22-2007, 11:12 AM   #1
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Retirement accounts for students/unemployed?

Hi,

Sorry if this was asked before but new to this forum and retirement investing
I graduated recently and have yet to find a job. My parents are kind enough to support me in the mean time. I wanted to know would it be possible for me to open a IRA other retirement account even though I have no income?

I have money in the bank and was wondering if I could put that in a retirement account.

I have invested in a mutual fund but that is a regular account not a IRA or other tax exempt/differed accounts

Thanks
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 11:16 AM   #2
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Re: Retirement accounts for students/unemployed?

To invest in an IRA you'll need earned income. So savings doesn't qualify. If you had a part-time or summer job that income would qualify you.

Without the earned income an IRA is not an option.
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 11:21 AM   #3
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Re: Retirement accounts for students/unemployed?

Thats what I thought. Thanks for confirming it
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 11:24 AM   #4
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Re: Retirement accounts for students/unemployed?

There are some fine points that may apply...

If you are married to someone who has earned income you can probably invest in an IRA.

If you have qualified (401k, 403b) accounts from a previous job then you can roll them over into an IRA.
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 11:28 AM   #5
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Re: Retirement accounts for students/unemployed?

An HSA doesn't require earned income. It requires a high-deductible health insurance plan though.
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 11:45 AM   #6
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Re: Retirement accounts for students/unemployed?

Any earned income will do, including self-employment income. My son works at several sports camps annually, and even though he typically earns less than $500 per camp and does not recieve W-2s or 1099s, he declares them as self-employment income and can use that to fund Roth IRAs. Sure, you have to pay SE taxes, but IMHO, its worth the RIRA benefit.
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 12:11 PM   #7
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Re: Retirement accounts for students/unemployed?

Problem is I don't work at all. All my money is in a savings account. How would I show earned income. Even self-employed income?
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 12:41 PM   #8
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Re: Retirement accounts for students/unemployed?

Well you could start a business and pay yourself money that would be income to the business...

You would have to pay payroll taxes and income taxes on the income.

However if you got a deductable IRA with your income, you could then deduct the amount of your IRA from your income. Using this technique you'd only have to pay payroll taxes on that income (maybe 12.4 %) to enable your IRA.

The downside is that when you do withdraw the money from your IRA then you'll have to pay income taxes on the withdrawal.

The whole concept would be counter to your wealth BUT you would qualify for an IRA.
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Re: Retirement accounts for students/unemployed?
Old 02-22-2007, 02:25 PM   #9
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Re: Retirement accounts for students/unemployed?

2007 is still young, and you may have earned imcome yet. As long as you earn income in 2007, you will be able to use your savings to contribute for 2007 up through April 15, 2008.

But as was mentioned in another thread, you will want to wait until you actually earn the amount you will contribute so that you don't have to undo the contribution later.
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