Making Roth Contributions in or near Retirement

[qwerty3656]

I know some clever guy is going to think "why don't I employ my wife to be my housekeeper and cook, and she can employ me to be her mechanic and gardener (or vice versa)? Then we could contribute our pay to our Roth IRAs." Actually too clever by half, because you'll have to each pay income tax on that income, and if it's more than $400, you'll also have to pay the Social Security and Medicare taxes - both halves (employer and employee). You always hear about people employing their kids. I know someone who puts a picture of their dog on their business card and (I guess) writes off dog expenses as a business expense.

I guess it makes sense when you have other earnings to shelter. You always hear about people employing their kids. I know someone who has a picture of their dog on their business card and writes of the dog expenses.

 

[Al18]

FYI you can make a spousal Roth IRA contribution even if the spouse has no earned income. In order to do this, one of you needs earned income. Spousal IRAs: Rules, Limits, Deductions & How-to's | The Motley Fool

 

[bada bing]

One downside of moving out of the US is that you may encounter what I have here: Switzerland does not recognize the tax benefits of 403(b)s, 401(k)s, and Roth IRAs. Distributions from these are all taxed as regular income. I will be feeling that in 2 more years.

-BB

I don't know anything about Swiss taxes. But there is no RMD or withdrawal requirement for Roth IRAs. The conventional wisdom is that generally Roth money is the last to be withdrawn and spent. In your case that seems doubly appropriate.

I have made Roth IRA contributions since starting partial retirement 5 years ago. I will continue for as long as I have earned income to qualify. The annual contribution limit is a "use it or lose it" proposition. There is absolutely no potential downside to contribution money into a seasoned Roth after age 59.5. You have full access to all Roth money from day one. I also have been doing Roth conversions, but that is more nuanced and requires some tax strategy to evaluate the proper amount. But Roth contributions if you have the earned income to qualify and the money to depost ? Yeah, 100% do it.

 

[Koolau]

I know some clever guy is going to think "why don't I employ my wife to be my housekeeper and cook, and she can employ me to be her mechanic and gardener (or vice versa)? Then we could contribute our pay to our Roth IRAs." Actually too clever by half, because you'll have to each pay income tax on that income, and if it's more than $400, you'll also have to pay the Social Security and Medicare taxes - both halves (employer and employee).

I guess I'm not too clever. The thought never occurred to me. I'm guessing it's been tried with disastrous tax consequences.

 

[NomDeER]

One downside of moving out of the US is that you may encounter what I have here: Switzerland does not recognize the tax benefits of 403(b)s, 401(k)s, and Roth IRAs. Distributions from these are all taxed as regular income. I will be feeling that in 2 more years.

This is also true for many beneficiaries outside the U.S.. My beneficiaries live in Australia, and I recently discovered that, if they inherit my Roth IRA, they have to pay taxes in Australia for anything besides whatever the basis is (and good luck to them trying to figure that out). If I take all the money out of the Roth IRA and put it in a bank account the day before I die, they pay no taxes on it. Nutty but true. So, as I age, I probably will take the money out of the Roth IRA sooner rather than later.