Can a Person Who Is Retired Continue to Fund an IRA? Essential Guidelines for Post-Retirement Contributions

Can a person who is retired continue to fund an IRA? Yes, as long as you have earned income, you’re eligible to contribute to an IRA even after retirement. This article will guide you through the rules for post-retirement IRA contributions, including what counts as earned income and how you can still contribute through a spousal IRA if you’re not employed.

Key Takeaways

Eligibility for IRA Contributions After Retirement

Retired couple discussing IRA contributions

If you’re retired and mulling over the idea of contributing to your IRA, it’s essential to understand the eligibility requirements. The primary requirement is earned income, which includes wages or self-employment income. Now, let’s explore what qualifies as earned income and how it impacts your IRA contributions.

What happens if you’re not employed, but your spouse is? Can they contribute to an IRA for you? Absolutely, they can do so using a spousal IRA. Now, let’s discuss the details of this arrangement.

Earned Income vs. Unearned Income

In the context of IRA contributions, all income is not regarded equally. Earned income, encompassing salaries, wages, tips, and bonuses, is necessary for both traditional and Roth IRA contributions. However, dividends or interest, categorized as unearned income, aren’t eligible towards your IRA contributions. It’s essential to understand your modified adjusted gross income, as it can impact your eligibility for certain tax benefits and Roth IRA contributions.

What if you receive both earned and unearned income? Only earned income counts towards your IRA contributions. Therefore, if you’re retired and earning dividends or interest from investments, you can’t contribute this income to your IRA. However, if you’re still part-time employed or running a business, that income can be used for your IRA contributions.

Spousal IRA Contributions

Spousal IRA contributions serve as a beneficial strategy for married couples filing jointly where one spouse is employed while the other isn’t. In such a case, the working spouse can contribute to an IRA for the nonworking spouse, hence doubling their IRA contributions. Now, let’s examine the contribution limits for a spousal IRA and the requirements.

The contribution limits for a spousal IRA are the same as for a regular IRA. This means you can contribute up to $6,000, or $7,000 if you’re 50 or older. The only requirement is that the working spouse must have enough earned income to cover both their own IRA contribution and the spousal IRA contribution.

Understanding Traditional and Roth IRAs in Retirement

Comparison between Traditional and Roth IRAs

As a retiree, your options boil down to two primary IRA types: traditional or Roth IRA. Each possesses unique tax benefits and withdrawal regulations, making them ideal for diverse retirement strategies. Let’s examine the fundamental differences between these IRAs and their effect on your retirement savings.

Traditional IRAs offer tax-deductible contributions and tax-deferred growth. This means you don’t pay taxes on your contributions or earnings until you withdraw them. On the other hand, Roth IRAs offer tax-free growth and withdrawals, but your contributions aren’t tax-deductible. Let’s delve deeper into the tax benefits of these two types of IRAs.

Tax Benefits of Traditional IRAs

One of the main benefits of a traditional IRA is that it allows for tax-deductible contributions. This means that individuals can lower their taxable income by contributing to their IRA. This means that whatever amount you contribute to your traditional IRA can be deducted from your taxable income, reducing your tax bill for the year. But what about the growth of your investments in your IRA? That’s where the concept of tax-deferred growth comes in.

With a traditional IRA, your investments grow tax-deferred. This means you don’t pay any taxes on your earnings until you withdraw them. By the time you start withdrawing your funds in retirement, you might be in a lower tax bracket, effectively reducing your tax bill.

Advantages of Roth IRAs

While traditional IRAs offer tax-deductible contributions and tax-deferred growth, Roth IRAs provide their own set of benefits. With a Roth IRA, your contributions are made with after-tax dollars. This means you can’t deduct your contributions from your taxable income. However, your investments grow tax-free, and your withdrawals in retirement are also tax-free.

Another advantage of Roth IRAs is that there are no required minimum distributions (RMDs) during your lifetime. This means you’re not forced to withdraw your funds at a certain age, unlike with a traditional IRA. You can leave your money to grow in your Roth IRA for as long as you want, giving you more flexibility in managing your retirement savings.

Contribution Limits and Age Restrictions

Retiree reviewing IRA contribution limits

Post-retirement IRA contributions carry certain limits and restrictions. So, what are these ira contribution limits and their implications for your retirement savings? Simply put, the contribution limits persist even during retirement, allowing you to contribute up to $6,000 annually or $7,000 if you’re 50 or above.

But what about age restrictions? Before 2020, you couldn’t contribute to a traditional IRA once you turned 70 ½. However, this age limit has been removed, allowing individuals of all ages to make regular contributions to both traditional and Roth IRAs, as long as they have earned income.

Navigating Required Minimum Distributions (RMDs)

Senior individual managing Required Minimum Distributions

One of the key aspects of managing traditional IRAs in retirement is navigating Required Minimum Distributions (RMDs). These are the minimum amounts you’re required to withdraw from your traditional IRA each year once you reach a certain age. But what age is that, and how do you calculate your RMD?

The SECURE Act, which was passed in 2019, made some significant changes to the RMD rules. It increased the age at which you must start taking RMDs from 70 ½ to 72. This gives you more time to let your savings grow before you start drawing down your account. But what does this change mean for your first RMD?

RMD Age Changes Under the SECURE Act

The SECURE Act has had a significant impact on retirement planning, particularly when it comes to RMDs. Before the SECURE Act, you had to start taking RMDs from your traditional IRA in the year you turned 70 ½. But the SECURE Act increased this age to 72, giving you more time to let your retirement savings grow.

For your first RMD, the SECURE Act allows you to wait until April 1 of the year after you turn 72. This delay means you could potentially have two RMDs in the same tax year, which could bump you into a higher tax bracket. Therefore, it’s important to plan your withdrawals carefully to minimize your tax liability.

Strategies for Maximizing Retirement Savings

Retirement savings and wealth management strategies

Having reviewed the rules and regulations of post-retirement IRA contributions, let’s explore strategies to bolster your retirement savings. A highly effective strategy involves:

Another strategy is to make catch-up contributions if you’re 50 or older. These are additional contributions you can make above the annual limit, allowing you to increase your retirement savings.

Finally, consider the benefits of tax-deferred accounts. These accounts, such as traditional IRAs, allow your investments to grow tax-free, reducing your tax bill in retirement.

When to Consult a Financial Professional

Post-retirement IRA contributions management can be intricate, particularly when dealing with tax implications and withdrawal strategies. In such scenarios, a financial professional’s assistance can be invaluable. They can offer personalized advice tailored to your unique circumstances, aiding you in optimizing your retirement savings.

A financial professional can assist you with:


We’ve covered a lot of ground in this blog post, from eligibility criteria for making IRA contributions after retirement to strategies for maximizing your retirement savings. The key takeaway is that, yes, you can contribute to your IRA after retirement, provided you have earned income. And with the right strategies and professional advice, you can optimize your retirement savings to ensure a comfortable retirement.

Remember, retirement planning doesn’t end when you retire. In fact, managing your retirement savings effectively is more important than ever to ensure your nest egg lasts throughout your retirement. So, whether you’re planning for retirement or already retired, it’s never too late to make smart decisions about your IRA contributions.

Frequently Asked Questions

Can I still contribute to an IRA after retirement?

Yes, you can still contribute to an IRA after retirement by having taxable compensation or earning income from work. This allows you to continue investing for retirement even after you’ve officially retired.

At what age can you no longer contribute to a traditional IRA?

You can contribute to a traditional IRA at any age, as there’s no longer an age limit for contributions, though required minimum distribution (RMD) rules still apply at a certain age.

What is the difference between earned and unearned income?

The difference between earned and unearned income is that earned income, like wages or self-employment income, is required for IRA contributions, while unearned income like dividends or interest does not qualify.

What are the tax benefits of traditional and Roth IRAs?

Traditional IRAs offer tax-deductible contributions and tax-deferred growth, while Roth IRAs provide tax-free growth and withdrawals. Consider these factors when choosing the right account for your retirement savings.

What are the contribution limits and age restrictions for IRAs?

You can contribute up to $6,000 per year to an IRA, or $7,000 if you’re 50 or older. There are no age limits for IRA contributions as of 2020.