Starting Roth IRA after retirement

[f35phixer]

I guess i always understood you could start a Roth anytime, even after retirement? This was thinking that pensions were earned income!

This is a piece out of imvestopedia Understanding earned income "Also in this category are disbursements from non-deferred pensions and retirement plans"

If this is true DW retires 24Dec from Md State Retirement System, i need to get her Roth IRA started ASAP. And i retire from Federal service next year so we'll start mine too.

Please help me understand...

Thanks.

 

[Tekward]

Yes. I started my conversions this month. Previously income limits prevented me from contributing to a ROTH, but now transfers from 401K are mostly limited by how much tax I want to incur.


A useful link for a start: https://www.cnbc.com/2019/12/12/heres-how-roth-ira-conversions-can-deliver-some-hidden-benefits.html

 

[Mulligan]

Pensions are not earned income, so no possibilities there. Im a pensioner retired about 10 years ago. I have constantly contributed to Roth post retirement....The old fashioned way...A part time job gig that I used to fully fund it. Needless to say, if I could have shuffled pension money into a Roth, there would have been no gigs!

 

[CRLLS]

My understanding is that pensions are not considered earned income so cannot be used to "contribute" to a Roth. One can do a Roth Conversion from some retirement accounts if allowed by that account. I believe that one can open a Roth with that conversion. I am not certain of that. You may have to ask.

From https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income

Examples of income that are not earned income:
Pay received for work while an inmate in a penal institution
Interest and dividends
Retirement income
Social security
Unemployment benefits
Alimony
Child support.

I recommend for anyone to open a Roth for at least the minimum amount as early as possible. This gets the clock ticking. It gives one a lot flexibility in managing their retirement investments.

 

[SecondCor521]

My understanding is that pensions are not considered earned income so cannot be used to "contribute" to a Roth. One can do a Roth Conversion from some retirement accounts if allowed by that account. I believe that one can open a Roth with that conversion. I am not certain of that. You may have to ask.

You can open a Roth account any time.

You can only contribute to a Roth with earned income.

You can convert to a Roth if you have a suitable account to convert from (typically a traditional IRA) and are willing to pay the associated taxes.

The custodian could maybe charge custodial fees if you opened a Roth and left the balance at $0 for a while, but opening a $0 Roth and then doing conversions shortly afterwards is almost certainly acceptable.

 

[PaunchyPirate]

I started my Roth account this year after retiring at the end of last year. I only had $4600 of earned income this year from a final commission check from my employer that fell into January. I put $3600 in my Traditional IRA to lower my overall income some for ACA tax credit purposes. I put $1000 in a Roth to get the account open. I hope to do some Roth conversions from the Traditional IRA in the coming years into that Roth. I wanted to get it open to start the clock ticking toward the 5-year milestone for making withdrawals, just in case.