Can You Contribute to a Roth IRA After You Retire?

There are no time limits for Roth IRA contributions.

Although a Roth Individual Retirement Account does not allow you to take the tax deductions of a traditional IRA, it offers greater flexibility regarding contributions and withdrawals. One example is the age limit for contributions. A traditional IRA requires you to begin making withdrawals and cease making contributions after a certain age, but a Roth IRA imposes no such restrictions.

Basics

A Roth IRA differs from a traditional IRA in that Roth IRAs are not tax-deductible, meaning you get no tax breaks on contributions but also generally do not owe taxes on withdrawals. Because of the absence of tax liability on withdrawals, also known as distributions, the Internal Revenue Service allows you more flexibility in managing a Roth IRA. Unlike with a traditional IRA, for which you must begin making withdrawals by age 70 1/2, you may contribute to a Roth IRA at any age.

Benefits

Once money is in a Roth IRA account, it grows tax-free. Contributions to a Roth IRA account after you retire--if you can afford to make them--could help make your later years more comfortable. Since compounding interest applies to all IRA accounts, contributing money and not having to withdraw a certain amount would give your account the potential to grow considerably long past retirement age. It would also give you the option of leaving a larger sum of money to your beneficiaries.

Considerations

If you have a traditional IRA, you might weigh converting your account to a Roth IRA as you approach retirement age. Such a conversion entails paying taxes on the entire value of your IRA at a rate determined by your tax bracket. However, you would not have to begin making withdrawals at a particular age. This could be an advantage if you prefer to bequeath a significant portion of your IRA rather than using it as retirement income. It might not be advisable if you anticipate dropping into a lower tax bracket in retirement, since you would pay less in taxes on withdrawals from your traditional IRA than on the conversion.

Clarifications

Although you can contribute to a Roth IRA during your retirement years, you cannot contribute unlimited amounts of money. The IRS enforces contribution limits for traditional and Roth IRAs regardless of age. In 2010, for example, you could contribute $6,000 if you are older than 50. However, if your taxable compensation is less than $6,000, that figure is your limit. The IRS reduces your limit if your adjusted gross income is above a certain amount. But in retirement, your adjusted gross income is unlikely to approach those thresholds unless you file a joint return and your spouse continues to earn a high income.

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