Income required for Roth contributions

[Guest Bob Owens]

Does military retired pay count as income for the purpose of contributing to a Roth IRA?

[Appleby]

I am not sure about Military retired pay specifically- but generally, for purposes of contribution to a Roth IRA, any payment from your employer (including the one from whose services you have retired) can only be used if it is being reported as taxable wages on form W-2

[Guest David Hammond CISP]

At the risk of splitting hairs on this response, W-2 wages are not the only wages that qualify as earned income. W-2 wages are the "fail-safe" measurement that IRS uses for easily determining income that qualifies as "earned" for the basis of making any IRA contirbution.

Many people have earned income that is not reported on a W-2 Earning Statement such as self-employment income and income from independent contract work as reported on a Form 1099MISC.

If income is derived from employment service to a job, employer or profession it usually qualifies, where as passively received income will not.

W-2 wages are most common and the fail safe standard but not the ONLY income category that qualifies.

With so much confusion found regarding IRA qualification, I feel it important to be super-precise in our representation of these kinds of rules.

My $.02

[Appleby]

Good point David. However, while you are right, the issue in question is based on W-2 wages, as he was employed and receiving W-2 wages from the military. He will now apparently receive form post retirement benefits from his former employer, which cannot be used as compensation for the purposes of making an IRA contribution.