I make $30,000. My parents gifted me $5,500, which I placed in an IRA, reducing my taxable income and resulting in a better return. Was this wrong?
No, that was not wrong. On $30,000 income, you probably have difficulty saving for retirement. So, funding the IRA with the $5,500 gift was a good idea. If you are fairly young, that IRA can grow in value until your retirement. If your adjusted gross income for 2017 is less than $31,000, you may even get a retirement savers tax credit when you file your tax return. Your overall return will depend on how you invest your IRA, preferably in a low-fee mutual fund.
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Answered by: Ibolya Balog, CPA, is an associate professor at Cedar Crest College in Allentown, Pa.