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09-10-2013, 09:48 PM
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#1
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Recycles dryer sheets
Join Date: Feb 2010
Posts: 429
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Roth IRA after FIRE
I think the answer is no, but I wanted to make sure- after you FIRE, you can no longer contribute to a Roth IRA, is that correct? Is that because you need to have earned income in order to contribute to a Roth IRA? Are there other ways to put money into tax advantaged accounts after FIRE? Thanks.
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09-10-2013, 10:14 PM
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#2
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Full time employment: Posting here.
Join Date: Jul 2004
Posts: 512
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You are correct about needing earned income to fund any IRA. However, if you have a working spouse, they can contribute to a spousal IRA for you.
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09-10-2013, 10:16 PM
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#3
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Recycles dryer sheets
Join Date: May 2013
Posts: 78
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Assume rental income = earned income? And does that also stand for traditional IRA?
Thanks
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09-10-2013, 10:20 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Posts: 1,934
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Rental income is passive income and thus not earned income. You need earned income (from either a job or self-employment) to contribute to an IRA.
__________________
And if I claim to be a wise man, it surely means that I don't know.
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09-10-2013, 10:22 PM
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#5
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Recycles dryer sheets
Join Date: May 2013
Posts: 78
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Darn and thanks... Learning every day.
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09-10-2013, 10:38 PM
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#6
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Full time employment: Posting here.
Join Date: Jul 2004
Posts: 512
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 Quote:
Originally Posted by Clover5
And does that also stand for traditional IRA?
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Yes
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09-11-2013, 10:41 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
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Your best bet may be to Roth convert a tIRA, paying the taxes with money from a taxable account. This has the effect of shifting some of your taxable account (equal to the taxes paid) into the Roth IRA, where it is no longer taxed. Think of it this way: withdraw from tIRA, pay taxes from the withdrawn amount, leaving your net withdrawal. Now you can take that net withdrawal, add taxable money to it to bring the total back to the original tIRA withdrawal amount, and put it into the Roth. There is now more after tax value in the Roth than you had in the tIRA.
Also be sure to take advantage of your FIRE low income to make tIRA withdrawals or Roth conversions. The more you take out at low marginal tax rates, the less you have to take in RMD's later at possibly higher marginal tax rates.
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09-11-2013, 11:26 AM
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#8
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Recycles dryer sheets
Join Date: May 2013
Location: Western US
Posts: 226
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What about hobby income? I'm not really sure how hobby income works - haven't read the IRS regs on it yet. If I sell a few photos during the year can I then max out a Roth contribution?
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09-11-2013, 12:03 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 4,172
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sounds like .........it depends.......
Don't Get Caught By The Hobby Trap
one clue might be whether you pay SE tax on that income
if a business, might be earned income. true hobby....prob not.
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09-11-2013, 12:17 PM
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#10
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Recycles dryer sheets
Join Date: May 2013
Location: Western US
Posts: 226
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Thanks kaneohe, that's a good summary of the hobby vs. business rules. Looks like if it's truly a hobby, no earned income.
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