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February 26, 2019
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Is deferred incentive compensation considered earned income for purposes of contributing to an IRA?

  • February 26, 2019
  • 1 reply
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I retired last year at age 61 with unvested incentive compensation that will be paid out over the next four years.  I would like to continue contributing to my IRA, but I have learned that this may not be allowed if my deferred incentive comp is considered deferred income and not earned income.  To be clear, this incentive comp was never taxed and was withheld subject to me continuing to do a good job over subsequent years.  For the purposes of contributing to an IRA, is there a difference between deferred incentive comp which was mandatory and other deferred income which was elective?  Thank you.

    Best answer by NCPERSON1

    the requirement is 'income' but there are phase-outs depending on your income and you can't contribute once you reach 70.5 years old

     

    'deferred income' eventually becomes 'earned income' (over the next 4 years) in any event. 

     

    see the link below and especially the section called 'on your own'.

     

     

    https://turbotax.intuit.com/tax-tips/retirement/boost-your-retirement-savings/L3lryQHVz

     

     

    1 reply

    NCPERSON1Answer
    February 26, 2019

    the requirement is 'income' but there are phase-outs depending on your income and you can't contribute once you reach 70.5 years old

     

    'deferred income' eventually becomes 'earned income' (over the next 4 years) in any event. 

     

    see the link below and especially the section called 'on your own'.

     

     

    https://turbotax.intuit.com/tax-tips/retirement/boost-your-retirement-savings/L3lryQHVz