Can we open traditional IRA for $6,500?

[dlengyel1133]

Can each of us open a traditional IRA for $6,500?  I retired in 2016.  My company was sold in 2018.  I had stock options that vested in 2018 at the time of the sale.  Earnings were reported on a W2.  I am no longer in the 401(k) because I am retired.  I did receive a 1099 R for pension income.  We won't be 70.5 until 2020.  Can each of us open an IRA?

[CherylW · Accepted solution]

Yes, both of you can open and make contributions to an IRA if:

• you (or, if you file a joint return, your spouse) received taxable compensation during the year, and
• you weren't 70 1/2 by the end of the year.

If you file a joint return, only one of you needs to have compensation.

Compensation does not include pensions, however.  One of you must have:

• wages, salaries, etc.
• commissions
• self-employment income
• alimony and separate maintenance
• nontaxable combat pay

If you meet these qualifications, you can deduct $5.500 ($6,500 if you are age 50 or older) OR up to your taxable compensation for the year.  See the Kay Bailey Hutchison Spousal IRA Limit on what to do if only one of you has taxable compensation.