BillM223
Expert Alumni

Retirement tax questions

Only earned income can be used to calculate the Roth IRA contribution limit. This is why the word "compensation" is used above, because compensation (wages for working) is considered earned income.

 

On the other hand, pension income is not considered earned income or compensation. In this case, if the only income is pension income, the Roth IRA contribution limit would be zero (possibly leading to an excess contribution).

 

Please see this IRS page on 2019 Roth IRA limits for more information.

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