By Mike Miles
January 21st, 2013 | Uncategorized
Q. I will be retiring Jan. 31 from the Postal Service. In May, I will receive $10,000 and in May 2014, I will receive $5,000. Can this compensation be used to fund an IRA in years 2013 and 2014 even though I will be retired and not working another job? Is this considered earned income? I know federal and state tax will be deducted. I don’t know yet if Social Security will be deducted, too. What are your thoughts on this?
A. I believe that these payments are considered retirement income, and, therefore are not considered the basis for IRA contributions, but you should consult a qualified tax preparer to be sure.