Working Retirees Still May Contribute to IRAs

401k piggy bankKiplinger’s recent article, “Even Retirees Working Part-Time Can Contribute to a Roth IRA,” reminds us that if you’re retired but still work part-time, you can still contribute to a Roth IRA, even if you earned a few thousand dollars this year.

Provided that you have earned income from a job, you can make contributions to a Roth IRA and contribute up to the amount of your earned income for the year. The max is $5,500 for 2016 (or $6,500, if you’re 50 or older). If you work and your spouse doesn’t, you can even contribute up to $5,500 (or $6,500) to a spousal Roth IRA on his or her behalf, as long as your total contributions for both accounts don’t exceed the amount you earned from working. Therefore, your earned income for the year would need to be at least $13,000, if you’re 50 or older and want to contribute the maximum for yourself and your spouse.

In order to figure your maximum contribution, add up your earnings from working, such as any wages, commissions, bonuses, and self-employment income, along with alimony and maintenance payments through a divorce, since these must also be included in the earned income calculation for determining Roth IRA contributions.  However, your pension and investment income is not counted.

There’s no maximum age for contributing to a Roth IRA, but you must be under age 70½ to contribute to a traditional IRA. To qualify for Roth contributions this year, your modified adjusted gross income must be below $132,000 for singles and less than $194,000 if you’re married filing jointly. The contribution amount is phased out if your income is more than $117,000 if single or $184,000 if married filing jointly. The MAGI (“modified adjusted gross income”) figure used to see if you earn too much to contribute to a Roth, is calculated differently than the earned income figure used to determine how much you can contribute.

The deadline for contributing to a Roth IRA for 2016 is April 17, 2017.

Those retirees who’d like Roth IRA benefits but don’t earn enough to make the full contribution may consider converting money from a traditional IRA to a Roth. There are no minimum or maximum income limits for Roth conversions—you just need to pay taxes on the converted amount (or on part of the converted amount, if you made some nondeductible contributions in the past).

Reference: Kiplinger’s (December 2016) “Even Retirees Working Part-Time Can Contribute to a Roth IRA”

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