Very Low Income Roth IRA

[cangaroo]

Hi all:

I was hoping someone might jump in with some advice about a Roth IRA. I'm entertaining the idea of opening a Roth IRA before the April 15 deadline so I can have 2014 contributions. Vanguard's sounds appealing - however, my income for 2014 was less than $800 (I was volunteering overseas for much of the year). If I understand correctly, I can only contribute earned income to IRAs. And Vanguard has investment minimums of at least $1000 ($3000 for those I'm interested in).

Does it make any sense to open a Roth IRA now? I could put savings towards the Roth IRA to max out 2014 contributions, but I think this would incur a tax penalty.

[terran]

Yes, you are limited to contributing only up to your earned income, so $800 for 2014. Do you have any earned income for 2015? If you could get over $1000 between both 2014 and 2015 then you could invest in a target date fund. You could also look into investing in ETF's which don't have a minimum, but I don't know how that works -- it would be worth checking with vanguard to see if you need to do anything special to allow ETF trading in a roth.

[Cwadda]

Try calling up Vanguard and ask if they can do a $800 contribution for you and have it placed in a Money Market fund, but still classified as a Roth contribution. There's gotta be some kind of loophole - the customer service folks are usually pretty good at finding them for you.

[seattlecyclone]

Terran was on the right track. You can make 2015 contributions now too, so if you intend to have at least $200 of earned income this year you can go ahead and put in $1,000 now: $800 for 2014 and $200 for 2015.

[cangaroo]

Thank you all for the speedy replies! I was able put (at-this-point projected) 2015 earnings into the Roth IRA and meet the minimum investment amount.

A million thanks! This is such a great forum :D