I started contributing to my Roth IRA in 2004 and have blogged about it frequently. It was a great way to park savings I wasn’t going to spend anyway and let it grow without ever paying taxes on the gains. Last year I retired and I still don’t need the money yet, so not only did I not take any money out, I figured I should continue contributing. Then I found out this week that IRA’s are only supposed to be funded with earned income and my pension and investment income is not considered earned. Of course I had contributed as soon as I could, which was January 4. The IRS is somewhat reasonable about this, but would charge a 6% penalty on any amount I contributed beyond what I was supposed to every year that I don’t correct it. So as long as I could reverse that contribution by the end of the year, I wouldn’t owe a penalty. I called Fidelity to see what I should do and how to take the money out. Long story short, people do this all of the time and there is an online form you can fill out. The wrinkle is if your contribution has increased in value, they have to return that to you as well, so since the market is up this year, instead of $7,000, they are returning $7,220. And I will have to pay taxes on that $220 as if it were income. That was a nice tax shelter and I will keep money in my Roth IRA account for as long as I can. One of Mom’s advisors said Roth money is the last money you should use, I guess because it is tax free.