Can I put money in Roth before I earn it?

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Topic Author
foster918
Posts: 6
Joined: Fri May 03, 2019 9:59 am

Can I put money in Roth before I earn it?

Post by foster918 » Thu Jul 11, 2019 11:48 pm

Let's say it is January 1, and I have $6000 in the bank and am employed and will expect to earn well more than $6000 that year. Can I put that money into a Roth IRA on January 1 even though I haven't gotten any paychecks or earned any money yet as of that date?

Or would I have to wait until I actually receive a paycheck and be able to deposit up to that amount after tax withholdings?

Or would I be able to deposit the total amount I earned in the paycheck, not taking out the amount withheld by the employer?

Or another answer I haven't covered?

If any of you know, I would appreciate your response.

Thesaints
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Joined: Tue Jun 20, 2017 12:25 am

Re: Can I put money in Roth before I earn it?

Post by Thesaints » Fri Jul 12, 2019 12:07 am

IRS checks that you actually earned enough to contribute only at year's end (actually on April 15th to be accurate)

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FIREchief
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Re: Can I put money in Roth before I earn it?

Post by FIREchief » Fri Jul 12, 2019 12:39 am

If that is an issue, than the IRS will likely soon be knocking on many Boglehead doors.....
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

vipertom1970
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Joined: Fri Jun 21, 2019 7:06 pm

Re: Can I put money in Roth before I earn it?

Post by vipertom1970 » Fri Jul 12, 2019 12:52 am

Answer is yes.

rossington
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Location: Florida Suncoast

Re: Can I put money in Roth before I earn it?

Post by rossington » Fri Jul 12, 2019 3:58 am

Yes,but by the end of the year make sure you have earned enough to cover the contributions...(no brainer?).
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

Bacchus01
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Re: Can I put money in Roth before I earn it?

Post by Bacchus01 » Fri Jul 12, 2019 6:06 am

Yes. I do it every year on Jan 1 (or as soon as possible after)

CppCoder
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Re: Can I put money in Roth before I earn it?

Post by CppCoder » Fri Jul 12, 2019 6:57 am

As others have said, yes, and make sure you've earned it by year end. Also, make sure you are not close to the income limit for direct contributions to Roth. You don't want to reach December and then discover you will exceed the income limit having already made the direct Roth IRA contribution. If you're close and if your tIRA is clear, you're better off doing the backdoor contribution in January, even if your income stays within the direct contribution limit. Alternatively, wait until the point in the year you can be assured you will not cross the income threshold. This issue arises with people with significant variable pay.

atdharris
Posts: 114
Joined: Wed Jan 02, 2019 3:18 pm

Re: Can I put money in Roth before I earn it?

Post by atdharris » Fri Jul 12, 2019 8:35 am

Yes. 401k is the type of account where it comes out of your paycheck.

Topic Author
foster918
Posts: 6
Joined: Fri May 03, 2019 9:59 am

Re: Can I put money in Roth before I earn it?

Post by foster918 » Fri Jul 12, 2019 8:39 am

Thank you all for your responses! Very helpful.

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