Which statement best describes earned versus unearned income in pension terms?

• A. Earned income includes salary; unearned includes dividends and deposit interest
• B. Earned income includes rent; unearned includes salary
• C. Earned income includes salary and wages; unearned includes dividends
• D. There is no distinction between earned and unearned income

Answer: (A)

In pension terms, earned income is the compensation you receive from work—salary or wages—while unearned income comes from sources other than work, such as investments or property, like dividends and interest from deposits. This distinction matters because many pension rules use earned income to determine contribution eligibility or amounts, whereas unearned income is treated differently for these calculations.

The statement that earned income includes salary and that unearned income includes dividends and deposit interest correctly reflects this separation. Rent is typically considered unearned income, not earned, so that would not fit. A is the best description because it captures the standard distinction between work-based earnings and investment or property-based income. The other options either mix concepts incorrectly, are incomplete about what counts as unearned income, or deny the distinction altogether.