Reader Question – Can I Still Contribute to Retirement Plans After Retiring?

by Hank Coleman

Here is the next installment in our Reader’s Questions Series, which highlight questions emailed to me by you, the readers of Money Q&A. This time, we’re talking about income replacement with dividends when you retire. Be sure to find out at the end of this article how you can receive a free copy of Dave Ramsey’s book, The Total Money Makeover.

If you’re not familiar with Dave Ramsey’s book, you should run right out and get it. It is one of the best personal finance books that everyone should read. Now….on to our reader’s question. This week’s Reader Question is from Kim who writes…

I am retired and do not work. Can I still contribute to either my Roth IRA or traditional IRA while retired? My husband is still working and contributing to his company 401k retirement plan.

Yes, you absolutely can continue to make IRA contributions after retirement with a Roth IRA or traditional IRA. And, you should! It may seem a little counterintuitive to continue to invest for retirement while you are actually retired. There are many reasons why you should make IRA contributions after retirement. But, there are also a few roadblocks to consider as well.

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Why You Should Still Make IRA Contributions After Retirement

Why You Should Still Make IRA Contributions After RetirementLet’s face it. We’re all going to need as much money in retirement as we can possibly get. We’re not saving enough. Recent studies have bee abysmal on how little Americans are saving for retirement lately. More than one-third of Americans not even saving for retirement. So, in most cases, saving more – even in retirement – is almost always better.

Investing more money into IRA contributions after retirement can help you to build a retirement nest egg. Investing during retirement can help you to stay within your family’s monthly budget and limit your spending. It can also help you delay taking Social Security benefits until you’re older, which equates to hire monthly income. Investing more money into IRA contributions after retirement can also help justify taking Social Security benefits at 62 instead of waiting for your full retirement age.

Additionally, it is worth noting that investing more money into IRA contributions after retirement can increase the size of your estate for your heirs if you die before exhausting your retirement savings. While this isn’t an issue for most Americans, high-income earners will have to consider the implications for the Estate Tax and plan accordingly.

Contributing to 401k Retirement Plans After Retirement

You also can’t contribute to a 401k retirement plan after you leave your job. You can often continue to leave your money in your plan to earn interest and capital gains, but you will not be allowed to add to your 401k after you retire.

Most financial planners recommend rolling over your 401k retirement plan to a traditional IRA after you leave your employer. This will allow you to consolidate your investments and have better oversight of them. You can then add to, change allocations, and change investments after rolling over your 401k retirement plan to a traditional IRA.

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You may want to consider a partial rollover if you are still with your current employer. Check with your human resources department to see if your plan allows it.

You Have to Earn an Income to Contribute

One of the biggest stipulations to investing more money into IRA contributions after retirement is the income requirement. The IRS requires people to have an earned income in order to invest in a traditional or Roth IRA. In Kim’s example above, her husband works.

If you file a joint income tax return, only one spouse needs to earn an income in order for both to be eligible to invest in a Roth IRA or Traditional IRA. If a spouse continues to work while you are retired, you can continue to make contributions to a Roth IRA or Traditional IRA. This is also true for spouses and investors who work on a part-time basis. 

And, since you are at retirement age, you are most likely over 50 years old and eligible to make catch-up contributions to a Roth IRA or Traditional IRA.

Currently, you can contribute up to $18,000 in 401k, 403(b), and most 457 retirement plans. If you are a federal government employee or member of the military, you can also contribute up to $18,000 per year in the Thrift Savings Plan. The catch-up contribution limit for employees 50 years-old and over is an additional $6,000 per year for a total of $24,000.

If you meet the income requirements, you can also invest up to $5,500 per year in a Roth IRA. And, catch up contributions for a Roth IRA are $6,500 total per year if you are age 50 or older.

Another option when adding IRA contributions after retirement is a self-directed IRA. You can even invest in No Fee IRA from Lending Club with a self-directed IRA or a Roth IRA.

You cannot make a contribution to a Roth IRA or Traditional IRA though if your income consists solely of unearned taxable income. Most investors fall into this category when they earn income from sources such as pensions or annuities, rental property income, interest, dividends, or income from passive partnerships. You also can’t claim income from any tax-exempt income other than military combat pay.

Required Minimum Distributions of Retirement Accounts

You cannot keep money in your retirement accounts forever. Traditional IRAs, SIMPLE IRA, SEP IRA, 403b, and 401k retirement plans require you to start taking withdrawals when you reach the age of 70½.

Traditional IRAs, including SEP and SIMPLE IRAs, require that you start to take required minimum distributions (RMD) by April 1st of the calendar year after you reach the age of 70½. 401k retirement plans, profit-sharing, 403b plans, or other defined contribution plans require you start to take required minimum distributions by April 1st either when you retire or at age 70 ½, whichever is later.

Contributing to a Roth IRA while in retirement can make a lot of sense. Unlike a Traditional IRA, Roth IRAs do not have requirements for mandatory withdrawals. You can keep money in Roth IRAs until after your death if you chose to wait.

See the IRS website for examples of dates and how your birthday affects your required minimum distribution.

It seems a little counterintuitive to continue to invest for retirement while you are actually retired. But, investing in IRA contributions after retirement can help you make your money last longer in retirement. It’s a great deal if you can afford it and if your family’s budget supports doing it.

What about you? Do you still plan on contributing to your retirement accounts after you actually retire? I know that I do. I’d love to hear your thoughts.

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Past Readers’ Questions:

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]

Hank Coleman has written 582 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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