contribution limits

[Felicia]

IRA contributions are limited to the lesser of a set dollar amount and 100% of compensation. Assuming the 100% of compensation is the lower amount, can an individual invest 100% of compensation into the IRA and pay any sales charges by check (from passive income)?

[John G]

I am not sure I understand your question but will take a shot at answering what I think you are asking.

For all those under age 50, the current maximum annual Roth contribution is $4,000 or the persons earning income if below 4,000. If your income is below $4,000 you can still fully fund your Roth. In fact, someone else can fund your Roth as long as you qualify - parents for example can fund an employed teenager's Roth.

If the second part of your question is about annual fees - some brokerages and mutual funds allow you to pay these separately by check. That check, earmarked for fees only, does not count against your maximum Roth contribution. You can pay for fees from savings - there is no connection to passive income.

You did use the term "sales charges" and that can refer to other costs. If you are talking about mutual fund loads, you can totally avoid these commisions by choosing from the universe of NO LOAD mutual funds.

[Appleby]

.also, administrative fees that are paid out of pocket, must be paid before they are charged to the IRA, as any reimbursement would be considered a contribution.

If you are referring to commissions, those cannot be paid with funds from outside the IRA, as any such payments would be considered an IRA contribution

[Felicia]

Thanks for your input. I subsequently found Rev. Rul 86-142 that states that commissions and sales charges are part of the contribution.