Unemployed + windfall + Roth IRA?

[Guest TokyoDan0]

I am a U.S. Citizen who lives in Japan. I am currently unemployed and may choose to stay that way. My wife and I recently had a large windfall and want to invest it in bond funds for income preferrably in a tax deferred investment account.

Is is possible to open a Roth IRA in my situation?

[John G]

Maybe.

A windfall is nice, but you need "earned income" from your wife or yourself to qualify for a Roth. Earned income in its most common form is payroll that generates a W2 and it shows up on your 1040. Dividends, interest and capital gains to not count.

Also remember that even if you qualify (which is not clear from your facts), the maximum contribution for 2001 is two thousand dollars, and for 2002 is three thousand (+500 if you are over 50).

Remember that there are also income ceilings for a Roth, so if you windfall translates into a lot of taxable income (shutout above $160k, and a phase out above $150k) then you may be precluded from having a Roth even if you would otherwise qualify.

Perhaps you should buy some time from an accountant, tax professional or even a broker and discuss your options. Depending upon your expected income levels, tax free bonds may be an attractive alternative.

[Guest TokyoDan0]

Thanks for your help.