If you’re 50 and older, you can still make contributions to a Roth IRA as long as you are still working, although there are limits.
For those whose retirement savings are less than ideal, it is good to know that if you are working part-time during retirement, you can still make contributions to a Roth IRA, according to an article in Kiplinger’s, “Even Retirees Working Part-Time Can Contribute to a Roth IRA.”
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 certain limits. The contribution amount is phased out as well. 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.
A Roth conversion, that is, converting a traditional IRA to a Roth IRA, might be a good option for retirees who would like the Roth IRA benefits but aren’t earning enough to make the maximum contribution. If you decide to convert to a Roth IRA, make sure to include the taxes that you’ll owe on the converted amount or on part of the converted amount, if non-deductible contributions were made in the past. Speak with an estate planning attorney and financial advisor if you are not sure if this is the right move for you.
Reference: Kiplinger’s (December 2016) “Even Retirees Working Part-Time Can Contribute to a Roth IRA”