Roth IRA contributions during semi-retirement?

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A440
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Roth IRA contributions during semi-retirement?

Post by A440 » Tue May 22, 2018 7:28 am

I'm curious if those who semi-retire before age 59 1/2 and still earn a salary, do you still contribute to your Roth IRA? Or, did you stop contributing and instead use the money to pay for annual expenses?

Hubris
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Re: Roth IRA contributions during semi-retirement?

Post by Hubris » Tue May 22, 2018 7:56 am

my MIL does this, she’s 75 and earning money from writing. Her income from all sources including SS is about breakeven with her expenses so the Roth IRA contributions come from her taxable savings. She’s got a modest amount of total savings but this is the third year in a row that she’s made a Roth IRA contribution.

Uniballer
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Re: Roth IRA contributions during semi-retirement?

Post by Uniballer » Tue May 22, 2018 8:06 am

I talked my MFJ 80-ish parents into contributing all of their earned income last year, ~$10k, into their Roths.

infotrader
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Re: Roth IRA contributions during semi-retirement?

Post by infotrader » Tue May 22, 2018 9:41 am

Definitely.
As long as you don't use the money right away, there is no point to leave them in taxable account.

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David Jay
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Re: Roth IRA contributions during semi-retirement?

Post by David Jay » Tue May 22, 2018 9:48 am

If you need living expenses and have a taxable balance, I would contribute to your Roth and spend from the taxable account.

[edit] For clarity:
1. If you have free cash flow - fund your Roth accounts
2. If you do not have free cash flow but have taxable funds - fund your Roth accounts and take living expenses from taxable
Last edited by David Jay on Tue May 22, 2018 10:20 am, edited 2 times in total.
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veggivet
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Re: Roth IRA contributions during semi-retirement?

Post by veggivet » Tue May 22, 2018 9:52 am

Absolutely! I also convert as much as I can from my TIRA into my Roth to fill up the lowest tax bracket in an effort to reduce my RMDs which will start in 12 years.

fabdog
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Re: Roth IRA contributions during semi-retirement?

Post by fabdog » Tue May 22, 2018 9:52 am

I'm mostly retired for several years, and still below 59.5. Have a part time job in the winter and my wife works as well. We max out Roth every year and my small time consulting money goes to the Solo 401K

We plan to continue that as long as we have at least $13K of earned income and use taxable account to fund if needed

Mike

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House Blend
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Re: Roth IRA contributions during semi-retirement?

Post by House Blend » Tue May 22, 2018 9:56 am

A440 wrote:
Tue May 22, 2018 7:28 am
...those who semi-retire before age 59 1/2 and still earn a salary
Hmm, first two replies involve folks way beyond their 59.5th birthday....

Yes, it makes sense and should be prioritized above any Roth converting.

It is pretty much a no-brainer if your total income from all sources (including things like dividends from taxable accounts) exceeds expenses.

It is close to a no-brainer even if you have to sell taxable investments to cover the missing income. Roth investing beats taxable investing.

If you have no taxable account to draw from, and would have to tap tax-deferred then it doesn't make sense, because of the penalty. If there is a 401(k), and the retirement from that particular job took place at age 55 or later, then you have penalty free access to that account, and then it is roughly equivalent to Roth conversion. (Which doesn't always makes sense.)

MtnBiker
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Re: Roth IRA contributions during semi-retirement?

Post by MtnBiker » Tue May 22, 2018 9:58 am

If you have a 401k available, you can max out a Roth 401k in addition to maxing out personal and spousal Roth IRAs. Depending on individual circumstances, total contributions could be near twice earned income.

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dodecahedron
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Re: Roth IRA contributions during semi-retirement?

Post by dodecahedron » Tue May 22, 2018 10:18 am

A440 wrote:
Tue May 22, 2018 7:28 am
I'm curious if those who semi-retire before age 59 1/2 and still earn a salary, do you still contribute to your Roth IRA? Or, did you stop contributing and instead use the money to pay for annual expenses?
I contribute my part-time earnings *both* to a Roth 403(b) *and* a Roth IRA, as maximally as possible given the contribution limits. Also maximally contribute to my HSA.

I use money from a taxable account to pay for regular living expenses, including medical. I also consider each year whether it is worth doing some additional Roth conversions, taking into account "charitable deduction lumping" options and future giving plans.

feh
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Re: Roth IRA contributions during semi-retirement?

Post by feh » Tue May 22, 2018 12:04 pm

A440 wrote:
Tue May 22, 2018 7:28 am
I'm curious if those who semi-retire before age 59 1/2 and still earn a salary, do you still contribute to your Roth IRA?
Yes.

The Wizard
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Re: Roth IRA contributions during semi-retirement?

Post by The Wizard » Tue May 22, 2018 12:42 pm

veggivet wrote:
Tue May 22, 2018 9:52 am
Absolutely! I also convert as much as I can from my TIRA into my Roth to fill up the lowest tax bracket in an effort to reduce my RMDs which will start in 12 years.
This discussion is about CONTRIBUTIONS when working part-time later in life, not CONVERSIONS...
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The Wizard
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Re: Roth IRA contributions during semi-retirement?

Post by The Wizard » Tue May 22, 2018 1:00 pm

To expand the topic a bit, even when beyond age 59-1/2, it's good to contribute to a Roth IRA from part-time earnings; I did on two occasions.
But in one case, combined retirement income and part-time work income put me over the direct Roth IRA contribution limit. So I did a backdoor Roth contribution that year. I was 66 then so that worked fine.
But once you are age 70+, contributions to a traditional IRA are no longer allowed, so the backdoor Roth contribution is no longer possible...
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bradpevans
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Re: Roth IRA contributions during semi-retirement?

Post by bradpevans » Tue May 22, 2018 1:05 pm

A440 wrote:
Tue May 22, 2018 7:28 am
I'm curious if those who semi-retire before age 59 1/2 and still earn a salary, do you still contribute to your Roth IRA? Or, did you stop contributing and instead use the money to pay for annual expenses?
Of course it depends on your income levels, but you may find the income tax rates at this stage of your life to be low, so paying
low income tax and none in the future might be wise. This is often the advice given to those just starting out with low income (low tax rate).
Pay now when taxes are low.

And of course you need to live as well...

Chicago60
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Re: Roth IRA contributions during semi-retirement?

Post by Chicago60 » Tue May 22, 2018 1:45 pm

My IRA is too large, and income too high in semi-retirement to do so. But, I do contribute to my individual 401K and Roth 401K. Additionally, my spouse will convert the balance of her IRA to her Roth soon, and then she will contribute to her Roth IRA by partaking in a backdoor Roth.

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