Any reason to make an IRA contribution?

[qwerty3656]

I retired the end of 2021. I had a few thousand dollars of earned income in 2022. I am already withdrawing money from IRAs (both taxable and Roth) to live on. As April 15th approaches, I keep thinking in the back of my mind, I should make a 2022 Roth contribution equal to my earned income, but I can't see how it would have any benefit.

 

[Sunset]

Make a ROTH contribution, not a regular IRA contribution.

Roths are tax free growth and withdrawal.

This is your last chance to make roth contributions, once you have no earned income, you can only do roth conversions (move $ from IRA to Roth and pay tax on the IRA withdrawal).

Hopefully you already have a Roth existing.

 

[Koolau]

Make a ROTH contribution, not a regular IRA contribution.

Roths are tax free growth and withdrawal.

This is your last chance to make roth contributions, once you have no earned income, you can only do roth conversions (move $ from IRA to Roth and pay tax on the IRA withdrawal).

Hopefully you already have a Roth existing.

+10.

If you can afford it, I would suggest you do it. AND I would not take anything out of a Roth in the future unless I had no other way to finance my FIRE lifestyle. Roth money is almost sacred to me. It's the last money I will touch. I hope to pass it on at my final graduation. As always, YMMV.

 

[Koolau]

Sorry, I should have added:

The only reason I would take a part time gig in retirement would be to fund a Roth IRA! I realize everyone's financial situation is different. But as long as they allow us to have and keep Roths, I'm gonna be the biggest cheerleader for them though YMMV.

 

[djsander]

We retired in 2021 and received a bonus check in 2022. We are doing Roth conversions and since I received the bonus check we did Roth contributions allowing us to pick up the savers credit and have no taxes for 2022. For 1 year we are in the group of people not paying taxes! If you have any tax liability and your income is low enough it’s worth it to contribute to a Roth. Even with no tax liability it’s worth it if you have income to show that allows for the Roth contribution.

 

[COcheesehead]

I use my part time retirement gig to fund my Roth as well.

 

[jazz4cash]

Make a ROTH contribution, not a regular IRA contribution.
.

OP is already taking Roth and tIRA withdrawals to live on. I would offset the Roth withdrawals by the contribution amount. I am taking tIRA withdrawals and making Roth contributions to boost the Roth balance for tax diversification and future flexibility.

 

[jollystomper]

Make a Roth contribution, it is a long term benefit as I see it. Both DW and have had a few "official" sort term paid gigs in our retirement and have used that to add to my Roth. We did not qualify for Roth IRAs when we worked, we may as well do it now .

 

[qwerty3656]

Some clarification. I'm using ACA, and have a specific taxable income I am targeting. I withdraw IRA money up to the targeted income and then withdraw Roth money for the rest of my spending needs.

I know the value of a Roth, but since I am already taking Roth money out to live on, I don't think Funding the Roth would provide any benefit (I would just turn around and pull that much more money out to pay bills). I just wanted a second opinion on whether I was missing something.

 

[lemming]

To answer the OP a Roth grows tax free so a that income is like buying a tax free bond-it doesn't add to your income for tax purposes
To all the others. I want to spend my Roth when I want to spend it. Don't say never I am not going to tke the whole balance out but I am going to take money to smooth out the unexpected bumps (this year-medical & dental) . It's my money and I want it now!

 

[Koolau]

Some clarification. I'm using ACA, and have a specific taxable income I am targeting. I withdraw IRA money up to the targeted income and then withdraw Roth money for the rest of my spending needs.

I know the value of a Roth, but since I am already taking Roth money out to live on, I don't think Funding the Roth would provide any benefit (I would just turn around and pull that much more money out to pay bills). I just wanted a second opinion on whether I was missing something.

Okay, I understand your situation now. I agree that there would be little point in opening or adding to a Roth only to take out the money.

However, I'd be looking for some way (any way) to fill in the income gap to avoid raiding my Roth IRAs. In my case, I'd start cashing in my old I-bonds, selling some silver or even gold, cutting expenses, heh, heh, selling DW's jewelry, sell one car, etc., etc. I'm that committed to Roths but YMMV.

 

[38Chevy454]

This is just an accounting equal sum exercise for OP. There is no gain for the Roth contribution if he just turns around and takes the money out. Just use the job income money as portion of your budget needs. Means less to take out of the Roth. To show this as example, say your job income $10K, but the normal taxable IRA withdrawal is $50K and your normal Roth withdrawal is $30K; then using the income as just spending money, you only need to withdraw $20K from the Roth along with your normal $50K from the taxable IRA withdrawal. Taxable IRA withdrawal is the same for ACA, and your Roth is $10K higher because of the $10K job income providing a portion of your total budget needs.

Long answer to the original question "Any reason to make an IRA contribution?" above, Short answer to original question, no there is no benefit to making Roth contribution with your job income.

 

[lemming]

I did not see that about getting to a level for the ACA subsidy. Could you use a TIRA contribution to lower your income to increase that subsidy. And keep some money out to keep from lowering your Roth balance.

 

[mebden]

Some clarification. I'm using ACA, and have a specific taxable income I am targeting. I withdraw IRA money up to the targeted income and then withdraw Roth money for the rest of my spending needs.

I know the value of a Roth, but since I am already taking Roth money out to live on, I don't think Funding the Roth would provide any benefit (I would just turn around and pull that much more money out to pay bills). I just wanted a second opinion on whether I was missing something.

Hi all, I just want to clarify something to make sure I'm right about what I'm thinking of doing when I retire. If I take say $40000 out of my taxable IRA and roll it over to my Roth IRA. I can use that as earned income that would work for the ACA insurance correct?

 

[qwerty3656]

Hi all, I just want to clarify something to make sure I'm right about what I'm thinking of doing when I retire. If I take say $40000 out of my taxable IRA and roll it over to my Roth IRA. I can use that as earned income that would work for the ACA insurance correct?

It's income and works for ACA, but it's not "earned" income (so doesn't work, for example, for IRA contributions)

 

[mebden]

It's income and works for ACA, but it's not "earned" income (so doesn't work, for example, for IRA contributions)

Ok thanks qwerty3656 so If I want to contribute to me Roth IRA I need a job to actually earn at least 7000 dollars to be able to contribute my 7000 dollars to my Roth IRA correct? but the 40000 I withdraw from my IRA will be taxable income so taxes would be taken out and I'd still need to file my taxes and report that 40000 correct?

 

[cathy63]

Ok thanks qwerty3656 so If I want to contribute to me Roth IRA I need a job to actually earn at least 7000 dollars to be able to contribute my 7000 dollars to my Roth IRA correct? but the 40000 I withdraw from my IRA will be taxable income so taxes would be taken out and I'd still need to file my taxes and report that 40000 correct?

Yes, you have a filing requirement if you have a $40K IRA withdrawal, even if it's a Roth conversion.

You need $7K of earned income to contribute that much to either a tIRA or Roth IRA, but it can be either W-2 wages/salary or self-employment income. You can also contribute less if you earn less. I made a couple thousand as a poll worker last year and that entire amount went into my Roth IRA.

 

[mebden]

Yes, you have a filing requirement if you have a $40K IRA withdrawal, even if it's a Roth conversion.

You need $7K of earned income to contribute that much to either a tIRA or Roth IRA, but it can be either W-2 wages/salary or self-employment income. You can also contribute less if you earn less. I made a couple thousand as a poll worker last year and that entire amount went into my Roth IRA.

Ok thanks cathy63 so I take it interest earned on savings doesn't count either as earned income? Income has to be on a W2 be used as earned income correct?

 

[cathy63]

Ok thanks cathy63 so I take it interest earned on savings doesn't count either as earned income? Income has to be on a W2 be used as earned income correct?

Yes, interest is not earned income.

Earned income is wages or salary reported on a W-2 and net income from self-employment that you report on a Schedule C or F.

Things that are not earned income are rents, royalties from someone else's work, oil/mineral rights, jury duty pay, cap gains, interest, dividends, rebates or refunds, unemployment compensation, welfare, gambling winnings (unless you're a professional gambler), etc.

 

[SecondCor521]

Earned income is wages or salary reported on a W-2 and net income from self-employment that you report on a Schedule C or F.

Can you give an example of Schedule F income that would work for an IRA contribution?

 

[cathy63]

Can you give an example of Schedule F income that would work for an IRA contribution?

Sale of crops? I haven't looked at Sched F but I would guess that's the kind of thing that goes on there.

The reason I say it's eligible for IRA contributions is because the sum of net income from Sched F, Sched C and K-1 1065 partnerships is used to calculate self-employment tax on Sched SE. The IRA contribution worksheet asks for self-employment net earnings minus 1/2 of the SE tax and SEP contributions, but it doesn't say where to get this number. I think it's reasonable to include all the income on which you're paying the employee's half of the SS tax, which is what's on line 3 of schedule SE.