Earned Income Required for a Roth

Can I as a retiree contribute to a Roth IRA? My only source of income is from my federal pension and investments. And if I can contribute to a Roth, should I?

You can contribute to a Roth IRA only if you have earned income from a job, so it looks like you don't qualify. One exception would be if you have a spouse who still works. In that case, she can contribute to a spousal IRA on your behalf as long as she earns more than she contributes to accounts for each of you, and you file a joint return. The maximum contribution in 2007 is $4,000 per person ($5,000 if you're 50 or older).

If you or your spouse do have earned income, you can contribute to a Roth at any age (unlike a traditional IRA, which prohibits contributions starting in the year you turn age 70½). To qualify for a Roth IRA in 2007, the adjusted gross income on your joint return must be less than $166,000 ($114,000 for singles). And the amount you can contribute starts to phase out at $156,000 ($99,000 for singles).

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You can benefit from contributing to a Roth even if you're well into your senior years. You can withdraw your contributions at any time, and your earnings are tax-free after age 59½, as long as you've had a Roth for at least five years (actually, it can be less than five years -- the five-year holding period begins on January 1 of the year for which you made your first Roth contribution, even if you made it by the tax-filing deadline the following April). If you die with a Roth, your heirs inherit the money income-tax free.

If you or your spouse had any earned income last year, you still have until April 17 to open a Roth IRA for 2006. And you can contribute to a 2007 IRA anytime now, too.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.