A:

Disability income, such as income received by disabled veterans, is not considered "compensation" for the purpose of contributing to an IRA. However, all is not lost. You may invest your income in bonds, mutual funds or other assets. Some investments allow you to defer paying taxes on the interest and other earnings until you cash-in the investment (similar to earnings in Traditional IRAs). With other investments, the interest/earnings may be taxed in the year they are received.

For more detailed information, you should contact your financial advisor or financial institution and ask to speak with someone who is knowledgeable about the tax treatment of the return on investments. They should be able to provide investment options that suit your specific needs. (To learn more about bonds, see our Bond Basics tutorial. For more on mutual funds, see our Mutual Fund Basics tutorial.)

This question was answered by Denise Appleby
(Contact Denise)

Hot Definitions
  1. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  2. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  3. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center