<p>Really great questions, momof3great. I hope someone can help. Based upon my limited knowledge, I believe that you cannot contribute more than you made in earned income to any IRA. So if you didn’t have earned income, you couldn’t contribute anything to a deductible or non-deductible IRA.</p>
<p>But now the 401K is a different deal. I’m pretty sure you can convert that. When I left my last employer many years ago, I had a 401K that my employer had been contributing money to. So naive, I didn’t even realize I had it until they sent me a letter. That amount was the 14.9K that we invested with our friend. We rolled that over pretty quickly to an IRA, and gave it to him. A couple of years ago we then converted it to a Roth.</p>
<p>So I know I couldn’t do that with my current employer, as I’m still working for them, but a past employer, you should be able to roll over and convert. Or there may be a more direct way to do it. You would have to pay taxes on the conversion, though, but it might be worth it. You may be able to roll over both pre and post, though the tax payment might be a little tricky. Pay taxes on the entire amount of pre tax rolled over, and just the gain on the post tax.</p>
He is absolutely wrong. I just contributed my $6,000 for 2012 (I’m over 50) and $6,500 for 2013 and immediately converted. </p>
<p>
Yes you can. But if you have other IRA’s with deductible contributions, part of your conversion will be taxable. See my earlier posts on the subject. If you have no other IRA’s, then you can do it.</p>
<p>
Yes you can if you’re married and your spouse has earned income. You can contribute to a spousal IRA. My son just did that because his only income is a taxable scholarship which doesn’t count as earned income for this purpose, but his wife has earned income.</p>
<p>You listen to Clark Howard, busdriver? Thats cool. I know him! He’s a really nice guy. He really lives his fiscal frugal ways, but, he lives in a huge house and his wife drives a jag. In fact, I think she might have 2.</p>
<p>If he is wrong you should post it on his website. [Clark</a> Howard: Save More, Spend Less and Avoid Rip-offs | <a href=“http://www.clarkhoward.com%5B/url%5D”>www.clarkhoward.com](<a href=“http://www.clarkhoward.com%5DClark”>http://www.clarkhoward.com)</a> He really does want to have correct information.</p>
<p>That’s funny, jym. Well, he probably got his cars and house at a discount, and paid cash. So maybe he is living his frugal ways. He seems like a great guy. I should post the correction, there have been a couple of times he’s been wrong about things, so I rechecked them and didn’t just take it for granted. I guess you can’t know everything when the rules keep changing.</p>
<p>Yes, he would genuinely appreciate the correction… </p>
<p>Oh by the way, he bought this wife’s engagement ring (a ROCK) at Costco. He made $$$$$$ selling his travel agency before he had his first radio show (it was called “cover your assets”) and his family had a successful business so he isnt exactly a rags to riches guy. But he is humble and kind.</p>
<p>OK- last irrelevant but amusing story about Clark Howard. His grandfather was, IIRC the founder of the Lovable Bra company, whose motto was: “what God has forgotten we fill with cotton”. LOL.</p>
<p>He seems very down to earth and nice. Though I must admit…my husband always makes me change the radio when he’s on, because he thinks Clark sounds like he’s talking to little kids. That doesn’t bother me, but I know what he means.</p>
<p>Hilarious motto! I can’t believe I hadn’t heard of that one.</p>
Maybe that becuase the company, err… went flat. Groan. Sorry for the bad pun, but yes, the bra company is no more. At least not here in the US.</p>
<p>I loved the name of his radio show-- cover your ass-ets. Cracked me up.
And yes, he’s aware his radio /tv voice isnt great, but thats how he talks!</p>
<p>No, I think his voice is fine. He breaks things down in a very simple way so people can understand. I like Dave Ramsey too, but Clark doesn’t make me feel guilty for screwing up my finances. But there will be things that irritate one about most any radio talk show host. My husband used to flip the channel as soon as he realized it was Dr Laura, just thought she was too mean. But I liked her. Different things for different people.</p>
<p>Dr. Laura?? OOOh, don’t get me started on that charlatan woman. Cruel, mean-spirited woman who verbally abused poor callers who already had a history of abuse. She was a quack, with a degree in physiology, not psychology. Remember when curmudgeon mentioned the nudie photos of her out on the web? He was right. they are out there.</p>
<p>I never looked at the photos, but I figured it was none of my business. God help us if everyone knew the trouble we caused decades ago (though fortunately there aren’t pictures of it for most of us). I must admit, sometimes she was even too mean for me, but sometimes I thought she gave great advice, if people would listen. I had some long drives, and if it was between her, Michael Savage or NPR, well she would win out. And I had to think, who are these idiots calling her, asking questions that anyone who’d listened to her for one day would get REAMED for!</p>
<p>I’d have picked NPR over her any day. People were foolish to call in if they really wanted advice. It was a radio show looking for ratings, and her yelling at them did the trick for the ratings, not for their mental health. She gave me the shivers. Whooh. Reched woman. I don’t know anyone personally who posed nude for photographers. I guess I was a prude.</p>
<p>I swear, every time I turn on NPR they are talking about something ridiculous and boring. It always reminds me of the SNL skits on NPR about Alec Baldwin’s Schweaty Balls, or the magic mushrooms…but not as funny.</p>
<p>On another note, this thread has started me thinking about the entire Roth thing and is really driving me crazy. The post that you wrote, I think, jym, about your kid having a Roth pretty early started me thinking. Why didn’t we start a business when our kids were ten, make them work a bit for us, and then pay them through funding their Roths? If we had done that for the last decade, and had our friend invest it, they would have been millionaires in their thirties, based upon that alone. That is, if that would be legal to do. Why didn’t we do that? It wouldn’t have been much money at all.</p>
<p>We told them that we’d give them cars for college graduation (nothing special, just modest cars), since we didn’t get them anything for high school or age 21 graduation. But now I’m thinking it would be better to put that money in for 3-4 years of a Roth, as long as they’ll have the income. Why have a depreciating asset that they might barely use, when they could have a massive wealth builder that they’ll never pay taxes upon. I knew we should have done this a long time ago, but just didn’t get to it. It’s really starting to bother me, thinking about it. I hope they go for it.</p>
<p>I went to a recent talk given by Ira Glass, of NPR. Pretty interesting fellow.</p>
<p>As for paying the kids early. First, they really have to have performed a job and earned the income. I legitimately paid them for office computer repair, maintenance, upgrades, etc. They earned their $$. But definitely, even though they were probably capable of doing so at an earlier age, we wouldn’t have wanted them to have earned income, as when they have earned income then it messes up claiming them as dependents on your taxes. I hope someone will post more about this as I know I am not going to get it right (I am not a CPA and my recall on this is fuzzy), but one year when S#1 was in MS and S#2 was still in lower school, they were extras in a movie being filmed at the school. It was a whole lot of sitting around for $50, but they were THRILLED to be paid. We had to fill out all sorts of forms, but yup, the checks came in the mail. Unfortunately, so did a 1099 at the end of the year!! For $50!!! Grrrr… So they each had earned income and we couldn’t claim them on our taxes that year. We had to file them separately because they had earned income. Makes no sense to me looking back because of course we provided the lions share (ie ALL) of their care, but all I remember is it cost us $$$$ in what we lost by not being able to claim them that year. Grrr…
So be careful what you wish for Seems to me we started having to file their taxes separately when they were 14. Does that sound right?</p>
<p>That said, yes, we are very glad, once they did file their own taxes, that we were able to pay them a small amount, subtract the taxes, and fund their Roths. So in essence they never “saw” the pay. It got converted to their Roths, but its slowly building a nice nestegg. They can take care of me in my old age :)</p>
<p>I guess I never heard him speak, but he does sound interesting.</p>
<p>I don’t know that is correct that you can’t claim a kid as a dependent just because they have earned some income. You are still providing all of their support, and they still are dependents. That means that any year a child has a part time job they can’t be claimed, and I don’t think that is right. At least I hope not.</p>
<p>Interesting article, confirms what I thought. You can give them up to the max they have earned, to put into their Roth (or they can contribute their own money). My oldest has made a good chunk of change for years, so no problem for him, but the youngest will be lucky to clear 2K this summer with his meager pay as a camp counselor. Time to get a real job…though actually, they work their butts off much harder at camp.</p>
<p>I think it had something to do with the combination of earned and unearned income (there were some investments in their names, which in retrospect, for college loan purposes, was a bad decision, as this stuff was in their name). Anyway, I do remember that $50 of earned income that they had made us file something separately for the younger one who was still in elementary school, and it cost us $$ in what we could not deduct on our taxes this year. I recall the accountant groaning loudly when we told her they each got a 1099. Oh, and we all ended up on the cutting room floor (I was in it too but didnt get paid a dime).</p>
<p>We did not pay the kids much when the did the computer work, so its not like their Roths are going to massively grow exponentially. That said, its better than a kick in the teeth, for sure. And they have contributed their own funds as well when they earned $ on internships, summer jobs (yup - both were camp counselors as well, and said it was the best form of birth control out there) and now with real big boy jobs.</p>
<p>** S#1 made a lot of $$ as a computer repair guy in HS. Younger s worked in food service more than in computers in HS. He did both. Hard work.</p>
Seems to me we started having to file their taxes separately when they were 14. Does that sound right?</p>