Can you contribute to a Roth IRA if you accept unemployment compensation when your income for the year is in severance and vacation pay?

Yes, that income is all the same as "working" income...vac pay and severance in particular...just paying you for services performed already. Why you would pick a Roth I'm not certain...it really only makes sense if your income from that is so much lower than normal that your tax rate is also much lower than normal. Check the link for more info on IRA qualifications...if you were covered by a 401k this year at the job, you may have some other problems. Best of luck...and congratualtions for being wise enough to think ahead, even with the hopefully short term challanges of work...too many actually make terrible choices - like cashing in 401k and such right now (causing bad tax consequences...and sacraficing the future).