You need earned income to contribute ROTH

來源: 2024-02-13 12:06:32 [博客] [舊帖] [給我悄悄話] 本文已被閱讀:

401K withdrawal are considered unearned income, similiar to interests earned from bank deposit. 

It is not earned income that is needed for ROTH. 

Of course you can easily work 4 weeks to earn income up to $6500 to contribute to ROTH, the problem is that you will pay social security tax on it, in additional to income tax.  Let's say you give your child $6500 to "hire" you as babysitter, that's earned income.  But your child as employer has to pay 7.65% social security tax for you, and you have to pay the other 7.65%.  So you and your child has to pay 6500*15.3%=$994 social security tax in order to get $6500 earned income reported as eligible for ROTH contribution.   Actually I think the employer's share of 7.65% doesn't count as your earned income, anyway, you get the idea. 

However, if you only earn $6500 well below the $22850 limit, your social security won't be impacted.  Only earned income above that limit will result in reduction in your social security payment.