This year for the first time, I received all of my income from pension (30K), 1099-MISC (subcontractor) (60K) and capital gains from the sale of a house (100K+)

Does this mean that I can not get either a traditional IRA or a ROTH IRA because I have no "earned income"?
Is there any other tax free investment available to me?

Thanks
John

John:

Income earned as a subcontractor is considered earned income. Hence, you can fund your traditional or Roth IRA up to $4,000 ($4,500 if you are over age 50). You have until April 15, 2006, to fund your 2005 IRA

In fact, you can also open up any of a number of pension plans for the subcontract business, to include a Self-Employment Plan (SEP) IRA, a SIMPLE plan, a profit sharing plan or even a 401K.

You can contact any of the brokerage houses (Fidelity, Vanguard, Schwab, etc.) or any bank for details. Unfortunately, I believe the various pension plans must be established (though not necessarily funded) by December 31, 2005 for you to put money in them for 2005. I may be wrong on that (laws change, and there was talk of making the SEP IRA funding exactly like a regular IRA), so you need to contact one of the institutions noted above for complete information. At the very minimum, you can start and fund a pension for 2006.

Many thanks.

I am reading about SEP-IRAs now. That sounds ideal for me since I can do it for about 13K instead of 4500 and it does appear that I can open it and fund it for 2005 up until 4/15.

John

John:

Glad to hear that the SEP-IRA option is still open to you.

However, you can also do the regular/Roth IRA in addition to the SEP-IRA for a total of $17,500.