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Roth IRA contributions without a job?




The IRS gets a little angry if you contribute to a file Roth IRA without what you call it earned income. This usually means that you need a paid job — working for someone else or for your own company — to make Roth IRA contributions. But what if you don’t have a job — which is a job — and you still want Roth?

Even if you don’t have a traditional job, you may be able to contribute to a Roth IRA.

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  • You can contribute to a Roth IRA if you have earned and meet income income limits.
  • Even if you don’t have a traditional job, you may have income that qualifies as “earned.”
  • Spouses without income can also contribute to Roth IRAs using the other spouse’s earned income.

The good news

Although this isn’t true in all cases, if you pay taxes on any type of income from work, there’s a good chance you’ll be making Roth IRA contributions. Although earned income usually includes wages, salaries, and tips, rewardscommittees, and Freelancing income, it also includes some types of income that you might not immediately think of as “earned.”

Here are some examples of ways you can fund a Roth without having a traditional job or fixed salary.


If you exercise stock options

when you exercise Non-qualified stock optionsYou will likely pay income taxes on the difference between the grant price and the price at which the options were exercised. You can contribute this taxable income to a Roth IRA.

If you are awarded a scholarship or fellowship

Some grants and fellowships Taxable– Especially those that pay for room and board, teaching, or research, or that include a stipend for living expenses. The catch is that you pay income taxes on this money. IRS Publication 970: Tax Advantages of Education covers this in detail. When you pay those taxes, you can usually use that income to justify a Roth IRA contribution.


If your spouse has an income

If your spouse earns income but you don’t, the IRS allows you to get your own IRA and use family money to make your annual contributions. Often called a IRA DoublesThese accounts work just like a regular Roth IRA. The only difference is that your spouse’s income, not yours, determines whether you qualify for a Roth IRA based on your income. maximum income limits.

Families often use a doubles IRA to double the amount they can contribute to an IRA each year. For the 2022 tax year, you can contribute up to $6,000 per person. If you are 50 or older, the maximum is $7,000. This means that couples can collectively contribute anywhere from $12,000 to $14,000, depending on whether one or both of them qualify for the award. Catch-up contributions.

These amounts increase in 2023 to account for inflation. So for 2023 you can contribute up to $6,500 per person, and the maximum is $7,500 if you’re 50 or older, which means couples can collectively contribute from $13,000 to $15,000 depending on eligibility to contribute catch-up .

Also, to qualify for a spouse’s IRA, you must file your taxes with the name of your spouse Presentation of the married couple. If the spouse without income returns to work at a later date, they can still contribute to an existing spousal IRA. After the account is set up, it’s an IRA account just like any other.


If you are receiving non-justiciable combat pay

You don’t necessarily need to pay taxes to contribute to a Roth IRA. For example, if you receive a non-deductible fee Fighting wageswhich was reported in box 12 of the file Form W-2you are eligible.

You have until the following year’s filing deadline to contribute to an IRA. In 2023, you have until April 18 in most states to make a contribution for the 2022 tax year.

Can a Stay-at-Home Parent Get a Roth IRA?

A stay-at-home parent who doesn’t have their own income can still get a Roth IRA. This so-called spousal IRA is just like any other Roth IRA, except that your spouse’s income determines whether you qualify for a Roth IRA based on the income caps.

In 2022, if your tax filing status is married filing jointly, you can contribute the full amount ($6,000, or $7,000 if you’re 50 or older). In 2023, if your tax filing status is married filing together, you can still contribute the full amount ($6,500, or $7,500 if you’re 50 or older).


What is earned income?

Earned income includes wages, salary, commissions, tips, bonuses, non-taxable self-employment income, payroll payments, and non-taxable combat wages. Taxable alimony and separate maintenance payments for divorce or separation decisions that were effected on or before December 31, 2018 are also considered earned income by the IRS.

What is not considered earned income?

The various types of income are not considered earned income for the purposes of contributing to a Roth IRA. These include interest and dividends, annuities or annuities, and Social Security or unemployment benefits.


bottom line

Even if you don’t have a traditional job, you may be able to contribute to a Roth IRA with income earned from non-traditional sources — if you don’t earn more than the income limits imposed by the IRS. As with any tax-related questions, individual situations can sometimes make a big difference, so it may be a good idea to check with a tax professional before making contributions.

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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets





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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008





US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .


Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.


In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically


As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return


It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters





© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.


The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage


Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.


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