You Don’t Need Income to Make an IRA Contribution

Contrary to what you may think, you don’t need to earn income to be able to make contributions to an IRA. You’re probably familiar with spousal contributions, but did you know that you can make contributions from when you exercise non-qualified stock options? The taxable portion is considered taxable income for IRA purposes. If you receive alimony, that too is taxable as ordinary income and is eligible for IRA contribution. Some scholarships and fellowships may be considered taxable income, depending on reported on the W-2 form. This last one can be valuable to young savers, such as your children or grandchildren. If you have a child (or grandchild) in graduate school living on a fellowship or scholarship money, you may want to see if that money is considered taxable income. If it is, you should talk to them about either setting up an IRA or, if they already have one, making a contribution. This could go a long way towards getting them on the right track towards retirement early on. If you have questions have whether or not something is considered taxable income or whether you are in a position to make a contribution to your IRA, you should speak with a certified financial planner.