May I use my W-2 income as the basis for contribution to a Roth IRA if that income is from a "special pension" which is part of my early retirement package. I am 79,

[jeptbtx]

I want to open a Roth IRA using my W-2 income even though I am retired.  This income is a "special pension" as part of my early retirement package. Payroll tax  (social security and medicare) is deducted from this income. I am 79 and doing annual RMD from my conventional IRA. 

Is it true that I may withdraw my contributions from a Roth anytime but must wait 5 years to withdraw earnings?

[RichardK · Accepted solution]

That is a great question, it would appear that you could make a ROTH contribution, as long as you do not exceed income phase-out limits.

The ROTH contribution does not have an age restriction, like the regular IRA, so your age is not a factor.

There is an earned income limitation, but if you are receiving a W-2 with payroll withholding, that would be earned income, even though you are retired (on the theory if it looks like a duck, quacks like a duck, and walks like a duck, it's probably a duck), and you should be able to contribute the lesser of the amount on the W-2 or $6,500.

Yes, you may withdraw the principal tax free, but you have to wait to withdraw the earning.