Funding an IRA · Pros and Cons. Yes, you can contribute to an IRA after you retire (with caveats). One method of conversion is to take a distribution from the traditional IRA and contribute it (reinvestment) to a Roth IRA within 60 days from the date of distribution. If you had a SIMPLE IRA or an SEP IRA but have retired from that job, you can still open an IRA through investment firms such as Vanguard or Fidelity.
You don't have to keep your IRAs in the same accounts from the date of contribution until the date of retirement. Ultimately, you'll need to decide if contributing to an IRA during retirement is a smart decision for you. In the coming years, when you're in a higher tax bracket, you'll be able to withdraw money that contributes to the tax-free Roth IRA. If you are retired and your spouse has earned income, he or she can contribute to their own IRA and also make what is called a spousal contribution to your IRA.
Hevert is in favor of Roth because there is no minimum distribution (RMD) required, so funds can continue to grow during retirement and can be used later in retirement or left to the heirs of an estate. Putting your money in an IRA when you've retired may mean keeping it for a certain period of time. Yes, you can contribute to an IRA after you retire, but you'll need to have a certain amount of “earned income” to do so. If you're currently in a lower income tax bracket than you expect to be in the future, you can basically pay your taxes in advance today by contributing to a Roth IRA.
Contributing to an IRA or Roth IRA during retirement has benefits, depending on your particular situation. First, make sure that you actually have the taxable compensation required to make the traditional IRA or Roth IRA contributions you're considering making. If you fund your IRA after you retire, you should consider the maximum contribution limits. If neither you nor your spouse actively participated in a business plan, you can deduct your traditional IRA contributions regardless of how high your income is.
In the recent past, you couldn't contribute to a traditional IRA once you reached the year you turned 70 and a half years old. For contributions to a Roth IRA, make sure you can contribute to a Roth IRA right from the start.