Can a SAHM have a ROTH?

[Guest AlaskanAtHeart]

I would like to open a Roth, but a financial advisor from a company I don't consider to be completey on the up-and-up (they were just in trouble with the SEC) said I do not qualify because I do not work.

Can someone clear this up for me, or point me in the right direction? Do you have to have a minimum income for a Roth IRA? TIA for any help.

[wmyer]

You need to have earned income in order to contribution to an IRA or a ROTH IRA. You don't need to have a minimum income--if you earn $100 during the year, you can contribute $100 to a ROTH (but not more than $100). If you earn $1,000 during the year, you can contribute $1,000.

Wait, I just realized that SAHM probably means stay-at-home-mom. If you are married and your husband has earned income, you could contribute to a ROTH IRA based on his income.

[Guest AlaskanAtHeart]

You need to have earned income in order to contribution to an IRA or a ROTH IRA. You don't need to have a minimum income--if you earn $100 during the year, you can contribute $100 to a ROTH (but not more than $100). If you earn $1,000 during the year, you can contribute $1,000.

Wait, I just realized that SAHM probably means stay-at-home-mom. If you are married and your husband has earned income, you could contribute to a ROTH IRA based on his income.

OK, I understand about the contributions to the Roth not being more than what I earn, but to expound on your second paragraph, yes, I am a stay at home mom, with a working husband.

My husband does have earned income (hmmmm.....that'll be another question in a moment), and could we each contribute $4000 a year based on his income?

Now, on to the earned income thing, he's military....sometimes his pay is tax free due to a deployment to a hot spot. Does that mean he does not have earned income and cannot contribute to a Roth that year? (Assuming the whole year is tax-free)

[Lori Friedman]

AlaskanAtHeart,

First, I send my best thoughts for your husband's safety and well-being. If he's overseas right now, I hope he'll be back with you and your family very soon.

Second, let's hear it for homemakers, who do one of society's most demanding and important jobs.

Concerning your question about your husband's nontaxable compensation... As you mention, military pay for service in a combat zone or qualified hazardous duty area is excluded from taxable income [i.R.C. Sec. 112]. The nontaxable compensation doesn't "count" for the purposes of figuring an IRA contribution. There's a helpful discussion and example at Notice 2003-21, Q&A 35, 2003-17 IRB 817.

[Guest AlaskanAtHeart]

AlaskanAtHeart,

First, I send my best thoughts for your husband's safety and well-being. If he's overseas right now, I hope he'll be back with you and your family very soon.

Second, let's hear it for homemakers, who do one of society's most demanding and important jobs.

Concerning your question about your husband's nontaxable compensation... As you mention, military pay for service in a combat zone or qualified hazardous duty area is excluded from taxable income [i.R.C. Sec. 112]. The nontaxable compensation doesn't "count" for the purposes of figuring an IRA contribution. There's a helpful discussion and example at Notice 2003-21, Q&A 35, 2003-17 IRB 817.

Thanks so much Lori, both for your compliments and your answer regarding military pay, that helps a lot.

I recently opened him a Roth, and he wants me to open one for myself, too, but I can't quite figure out yet if I am able to contribute to it or not.

[Guest AlaskanAtHeart]

OK, I found the answer, finally! Apparently wasn't searching with the right terms before: Spousal Roth IRA

[John G]

I don't know the technical answers about military pay, but I would imagine that if he was back here for a part of the year that you may hit the magically 8K for 2005. If you do any kind of part-time work, you may partially or completely qualify.

I was surprised by the prior post about overseas duty pay not qualifying. I would not have excluded military families.... if I wrote the IRS code.