Another IRA / Keogh question


G

GJ

I'm 67 - my wife is 62. I am self-employed and my wife is a housewife. We
file jointly. I have money in a Keogh and we both have Regular IRA's
For the past few years we have had a lot of deductions that allowed me to
take some money out of my Keoghs without any tax consequences. We have not
been contributing to our regular IRA's, although I have each year put money
in the Keogh.
This year I find there are some taxes to be paid over and above the
Self-employment tax.
So I found we could eliminate that with a small contribution to the wife's
IRA.
Now this started me thinking and brings me to my point and question.
I am playing around with the notion of taking a distribution from my Keogh
and offsetting the tax consequence of that distribution with a contribution
to my wife's IRA.
The pros are we pay no additional taxes. I pull tax-free distributions from
my Keoghs. We contribute to my wife's IRA, which adds 5 years to that money
before the RMD kicks in.
My question is what are the cons?

Roughly it seems as if a $3000 distribution from the Keogh is offset by a
$5000 contribution to the IRA.

Does this make any sense or am I missing something.

JW
 
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W

wyu

You only can contribute to an IRA if you have earned income. I'm pretty
sure distributions from retirement accounts do not count.
 
G

GJ

You only can contribute to an IRA if you have earned income. I'm pretty
sure distributions from retirement accounts do not count.
I am self-employed, does not that income count as earned income? Cannot my
wife qualify for an IRA on my self-employed income? We file jointly.

JW
 
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E

Ernie Klein

"GJ" <[email protected]> said:
I am self-employed, does not that income count as earned income? Cannot my
wife qualify for an IRA on my self-employed income? We file jointly.
Yes and yes. As long as your earned income equals or exceeds the total
amount contributed to both your and your wife's IRA it doesn't make any
difference who employed you, self or otherwise, or where the actual
money came from.

See IRS pub. 590.

http://www.irs.gov/publications/p590/index.html
 

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