Question

"A 55-year old individual has just retired after working for the same employer for 20 years. She will collect an annual pension benefit of $55,000, but is not yet ready to stop working.She has lined up a part-time job that will pay $4,000 this coming year. How much can she contribute to a Traditional Individual Retirement Account for her first year in retirement?"

Answer 1

$4,000

Step-by-step explanation:

Based on this scenario, this individual would be able to contribute a total of $4,000 to a Traditional Individual Retirement Account for this year. This is because a traditional IRA allows you to contribute 100% of your earned income up to a capped $5,500 per year but does not allow you for pension income contributions. Therefore this individual cannot contribute any of the $55,000 but can contribute all of the $4,000 she earned since she does not reach the limit.