Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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Which form of income does NOT count towards IRA contribution eligibility?

Salary
Wages
Interest income
Bonuses

The correct answer is: Interest income

To determine eligibility for contributions to an Individual Retirement Account (IRA), it is essential to understand what constitutes "earned income." Earned income typically includes salaries, wages, bonuses, and other forms of compensation received for work performed. However, interest income does not fall under this category. Interest income is considered unearned income, as it is generated from investments or savings accounts, rather than from working for compensation. Therefore, when assessing whether an individual qualifies to contribute to an IRA, the focus is on their earned income, which excludes income generated passively, such as interest. This distinction clarifies why interest income does not count towards IRA contribution eligibility, reaffirming the importance of recognizing the types of income that qualify under IRS guidelines for retirement plan contributions.