Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!
Money Girl
111 MG IRA Rules and Living Abroad
Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on US stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Sell or assessment fee not included. A limited number of ETFs are subject to a transaction-based service fee of $100. See full list at Fidelity.com/commissions. Fidelity brokerage services LLC member NYSE SIPC. AT&T customers switching to T-Mobile has never been easier. We'll pay off your existing phone and give you a new one free, all on America's largest 5G network. Visit T-Mobile.com/carrierfreedom to switch today. Pay off up to $650 via virtual prepaid mastercard in 15 days. Free phone up to $830 via 24 monthly bill credits plus tax, qualifying port and trade and service on Go 5G next to credit required. Contact us before canceling entire account to continue bill credits to credit, stop and balance and report finance agreements due. Hello and welcome to Money Girl's Quick and Dirty Tips for a richer life. I'm your host, Laura Adams. In this episode, I'll share a listener email that asks important questions about the rules for using IRAs to save for retirement and keeping with that theme, I also have an exciting announcement. My first audio book, Money Girl's Guide to Retirement Planning, goes on sale today. It's a must listen for anyone who wants to create a financially secure retirement, whether you're a complete beginner or have already started to save. It covers everything you need to know to be proactive and build the retirement of your dreams, even during market volatility. It's available on iTunes and Audible.com for just $5.95. It's a great way to learn about retirement planning and to support the show. It's great to get your listener emails, please keep them coming. Knowing what's on your minds helps me prepare topics for the show. I try to personally respond to as many questions and comments as I can. Recently, there's been lots of mail about saving for retirement, so I thought I'd share one from a listener named Robin, so everyone can benefit from the information. Dear Money Girl, I really enjoy listening to the podcast. I'm currently working abroad and am planning on filing a tax return in the U.S. for the income I made from January to June when I was working in the U.S. I recently listened to Episode 102, where you talked about some of the eligibility requirements for investing in an IRA. In the episode you say, "The annual maximum amount that you can contribute to a traditional IRA, Roth IRA, or to both, is limited by your taxable income up to $5,000 for 2008." So if you're a student and will only make $3,000 in 2008, for example, your IRA contributions cannot exceed $3,000. I'm wondering if I plan to stay abroad for more than a year. At some point, I will have very little taxable income for the U.S. and thus will not be able to contribute to an IRA. Is this correct? Is it possible to contribute $5,000 to a Roth IRA and $5,000 to a traditional IRA in the same year? Is there a difference in the way one would file taxes when one works for an American company abroad as opposed to a foreign company abroad? Thank you in advance for reading my questions, and I hope to hear an episode about this topic. Robin, thanks for your email. It's jam-packed with good questions. Let's first address the issue about paying U.S. taxes when you're living abroad. If you're a U.S. citizen or resident alien, your worldwide income is subject to U.S. income tax, no matter where you live. So the same rules generally apply for filing tax returns, whether you live in the U.S. or not. This is the case even if all your income is from outside the U.S. This applies to employees and self-employed subcontractors or freelancers. Robin, you didn't mention your citizenship status, so I'm going to assume that you are a U.S. citizen. If that's the case, you'll need to pay U.S. taxes on all the income you earned in 2008, not just the portion you earned from January to June. However, you may qualify for certain U.S. tax benefits if you meet some requirements while living abroad. You may be able to exclude a limited amount of foreign-earned income as well as your housing expense from your total income. You may also be able to claim a deductible. With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn on what you want, like trying out that new workout class, and 2% cash rewards on what you need, like a foam roller for your sore muscles. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card, that's real life ready. Terms apply. Learn more at wellsfargo.com/activecash. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. [BLANK_AUDIO]