Yes. You can contribute to a Roth IRA after retirement if you have earned income from work, such as part-time wages or self-employment income. Internal Revenue Code Section 408A ties every Roth contribution to compensation, so Social Security, pensions and investment income alone do not qualify.
For 2027, the Roth individual retirement account (IRA) limit is $7,500, or $8,600 at age 50 or older. That is unchanged from 2026, and it is capped at your earned income. Direct contributions phase out at modified adjusted gross income (MAGI) of $158,000 to $173,000 for single filers and $250,000 to $260,000 for joint filers in 2027.
There is no age limit. Retirees with no earned income can still move money in through Roth conversions.
The Earned Income Mandate That Controls Your Contribution Rights
IRC Section 408A requires compensation for every Roth IRA contribution. The Internal Revenue Service (IRS) counts wages, salaries, tips, commissions and net self-employment earnings in Publication 590-A. It also counts nontaxable combat pay, taxable alimony under pre-2019 divorce instruments, taxable non-tuition fellowship and stipend payments, and difficulty-of-care payments.
Pensions, Social Security and investment income do not count, whatever the amount. A retiree with a $100,000 pension in 2027 and no work cannot contribute.
Your contribution is also capped at 100% of what you earn. A retiree who earns $3,000 from part-time work in 2027 can contribute only $3,000, even though the 2027 limit is $7,500 under age 50 and $8,600 at 50 or older.
2026 and 2027 Contribution Limits That Define Your Maximum
The IRA limit is the same for 2026 and 2027: the base cap and the higher age-50 cap given above. The gap between them is the catch-up amount, $1,100 in both 2026 and 2027, as the IRS contribution limits page shows. The cap covers all your traditional and Roth IRAs combined, not each account.
You can make a 2026 contribution until April 15, 2027. A 2027 contribution is due by the 2028 filing deadline. A filing extension does not move either date.
Earned income still sets the ceiling. If you earn $4,500 from part-time work in 2027, the most you can put in for 2027 is $4,500.
Income Thresholds That Phase Out Your Eligibility
Your MAGI sets how much you can contribute. For 2027, the Roth phase-out runs from $158,000 to $173,000 for single and head-of-household filers and from $250,000 to $260,000 for joint filers. Married people who file separately and lived with their spouse phase out from $0 to $10,000 in both 2026 and 2027. Those who lived apart all year use the single range.
Inside the range, the cut is proportional. A single filer aged 50 or older with $163,000 of 2027 MAGI is one third of the way into the $15,000 range. The age-50 cap drops by $2,867 to $5,733, which rounds up to $5,740. The IRS rounds up to the next $10, with a $200 floor.
| Filing status | 2026 phase-out range (MAGI) | 2027 phase-out range (MAGI) |
|---|---|---|
| Single or head of household | $153,000 to $168,000 | $158,000 to $173,000 |
| Married filing jointly | $242,000 to $252,000 | $250,000 to $260,000 |
| Married filing separately, living with spouse | $0 to $10,000 | $0 to $10,000 |
Five Retirement Scenarios Where Contributions Remain Permitted
Each of these five income types counts as compensation, so each one keeps the Roth IRA open to you.
Part-Time Employment Income
Wages from a part-time job count, and they show up on Form W-2. A 67-year-old who works 15 hours a week at a retail store and earns $12,000 in 2027 can contribute the full age-50 cap for 2027.
The contribution comes from after-tax money. It does not lower the 2027 wages or the tax owed on them, unlike a deductible traditional IRA contribution.
Self-Employment and Consulting Income
Net self-employment earnings count as compensation. The figure is your net profit minus half of your self-employment tax, worked out on Schedule SE.
Take a retired engineer who bills $40,000 in consulting fees in 2027 and has $5,000 in expenses. Net profit is $35,000. Self-employment tax is $35,000 x 92.35% x 15.3%, or about $4,946. Half of that is about $2,473, so compensation is about $32,527. That is more than enough for the full 2027 age-50 cap.
No employer withholds tax on this income, so plan on quarterly estimated payments for 2027. The Roth contribution does not reduce them. The same income can also fund a Solo 401(k) or a SEP IRA.
Spousal Roth IRA Contributions
A spouse with little or no earned income can still contribute, using the working spouse's pay, when the couple files jointly. The rules for when a spouse can contribute are simple. The couple's combined contributions cannot exceed the taxable compensation on the joint return.
Here is a 2027 example. A 68-year-old husband earns $75,000. His 65-year-old wife is fully retired. He can fund the full age-50 cap in his own Roth IRA and the same amount in hers, $17,200 in total for 2027. Their joint MAGI must be under the start of the joint phase-out range for the full amount.
The spousal account belongs to her alone. She picks the investments, names the beneficiaries and decides when to withdraw. It is not a joint account.
| 2027 scenario | Working spouse's pay | Allowed contribution |
|---|---|---|
| Both age 52 | $80,000 | $8,600 each |
| Both age 48 | $45,000 | $7,500 each |
| Both age 55 | $12,000 | $12,000 combined, such as $6,000 each |
Military Combat Pay
Pay earned in a combat zone is tax-free, yet it still counts as compensation for a Roth IRA. A service member with $35,000 of tax-free combat pay in 2027 can contribute the full 2027 cap for their age. The money is never taxed going in, growing or coming out as a qualified withdrawal.
A Roth IRA sits on top of the Thrift Savings Plan, where the 2027 elective deferral limit is $25,500.
Timing follows the tax year. Combat pay earned in 2026 supports a 2026 contribution made by April 15, 2027.
Military retired pay is different. It is a pension, so it does not count.
Alimony from Pre-2019 Divorces
Taxable alimony counts as compensation only under a divorce or separation instrument signed before January 1, 2019. The instrument must not have been changed later to adopt the newer rules. Under later instruments, alimony is not taxable income to the person who gets it, so it does not count.
A 63-year-old who receives $30,000 a year under a 2017 divorce decree reports it as income and can contribute the full age-50 cap for 2027.
The date on the instrument decides it. A decree dated December 30, 2018 qualifies. One dated January 2, 2019 does not.
The New Saver's Match for Lower-Income Working Retirees (Starting 2027)
For tax year 2027, the Saver's Match replaces the Saver's Credit. It equals 50% of up to $2,000 you contribute, or $1,000 at most per person, claimed on Form 8880-A with your 2027 return. The IRS says matching funds "will go into a retirement plan or IRA."
The full 2027 match needs MAGI of no more than $41,000 joint, $30,750 head of household or $20,500 single. It ends at $71,000, $53,250 and $35,500. You must be 18 or older, not a full-time student and not a dependent.
A 2026 Roth contribution made by April 15, 2027 still earns the old Saver's Credit under its 2026 limits of $80,500 joint, $60,375 head of household and $40,250 single.
Income Sources That Never Qualify for Contributions
These four income types are common in retirement, and none of them counts as compensation.
Social Security Benefits
Social Security is not compensation, no matter the amount. A retiree with $40,000 of benefits and no job cannot contribute.
Working part-time changes that only by the amount earned. If a 68-year-old receives $30,000 in benefits and earns $5,000 in wages, only the $5,000 counts. Only the taxable part of the benefits goes into MAGI, figured with the worksheet in IRS Publication 915.
Roth money helps later. Qualified Roth withdrawals are left out of the provisional income formula, so they do not make more of your benefits taxable.
If you collect Social Security before full retirement age and keep working, the earnings test applies. For 2027, the Social Security Administration withholds $1 of benefits for every $2 you earn above $25,560. In the year you reach full retirement age, the 2027 limit is $67,920 and the rate is $1 for every $3. Only earnings in the months before you reach that age count. Withheld benefits are not lost. Your monthly benefit is raised at full retirement age to credit them back.
Pension and Annuity Payments
Pension and annuity payments come from past work, so they are not compensation. A retiree with a $70,000 pension in 2027 cannot use any of it for a Roth contribution. That holds for private, government and military pensions.
Required minimum distributions (RMDs) from traditional IRAs and 401(k) plans are in the same group. A 75-year-old who takes $50,000 in RMDs in 2027 has no compensation from them. An RMD also cannot be converted. The year's RMD must come out first, which shapes any Roth conversion after 73 and the planning around it.
Investment Income and Capital Gains
Dividends, interest and capital gains are unearned income. A retiree who makes $100,000 a year from stocks, bonds and mutual funds has plenty of income and zero compensation.
That covers every investment source, however the tax law treats it.
Retirees in this group can still build Roth assets through the conversions covered in the conversions section below.
Rental Property Income
Rental income is not compensation. A retiree with three rentals that bring in $60,000 a year cannot contribute based on that money, even if they manage the units and do the repairs themselves.
Real estate professional status does not change this. That status affects how passive losses are treated, not whether rent is compensation. Rent counts only in the rare case where it is self-employment income. An example is a property with hotel-like services, reported on Schedule C and subject to self-employment tax.
Roth Conversions: The Earned Income Alternative
A conversion is not a contribution. It needs no earned income and has no income limit. You move money from a traditional IRA or 401(k) into a Roth IRA and pay ordinary income tax on it that year. A 2027 conversion of $50,000 in the 24% bracket costs $12,000 in federal tax. A conversion cannot be undone, so converting after retirement takes planning.
A 2027 conversion starts its own five-year clock, but that clock only triggers the 10% penalty before age 59½.
The years before RMDs are the usual window. For 2027, joint filers reach the 22% bracket above $104,050 of taxable income and the 24% bracket above $218,250. Conversion income can also raise Medicare premiums two years later.
The Backdoor Roth Strategy for High-Income Retirees
The backdoor Roth gets around the income limit in two steps. First, make a nondeductible traditional IRA contribution, which has no income limit but still needs earned income. Then convert it to a Roth IRA soon after. Both steps go on Form 8606, and the 2026 form is the current final version.
The trap is the pro-rata rule. The IRS uses the December 31 balance of all your traditional, SEP and SIMPLE IRAs in the conversion year. With $92,000 of pre-tax IRA money in 2027 plus $8,000 nondeductible, 92% of any 2027 conversion is taxable. Rolling the pre-tax money into a workplace plan before year-end avoids this.
Calculating Your Contribution Within Phaseout Ranges
If your MAGI lands inside the range, you get a partial contribution. Here is the math for a single filer under 50 in 2027, using the under-50 limit above.
- Subtract the bottom of the range from your MAGI. With $165,500 of 2027 MAGI, subtract the start of the single-filer range.
- Divide the result by the width of the 2027 range, $15,000. Here that gives 50%. Joint filers divide by $10,000.
- Multiply the limit by that percentage. The base limit times the reduction fraction is a $3,750 reduction.
- Subtract the reduction from the limit. The allowed contribution is $3,750.
| 2027 MAGI, single filer | Allowed under 50 ($7,500 limit) | Allowed at 50 or older ($8,600 limit) |
|---|---|---|
| $160,000 | $6,500 | $7,460 |
| $165,500 | $3,750 | $4,300 |
| $170,000 | $1,500 | $1,720 |
A result that is not a multiple of $10 is rounded up, and the floor is $200. The Roth worksheets in Publication 590-A run the same steps.
Excess Contribution Penalties That Compound Annually
An excess contribution costs a 6% excise tax for 2027 and every later year it stays in, charged on the excess or your IRAs' year-end value, whichever is less. For 2027, an excess equal to the under-50 cap costs $450 a year. Report it in Part IV of Form 5329, following the IRS instructions.
To fix a 2027 excess:
- Withdraw it plus its earnings by your 2027 return due date, including extensions (October 15, 2028). No 6% tax applies. The earnings are taxable but escape the 10% early-withdrawal tax.
- Withdraw it later and owe the excise tax for 2027 and each year it stayed in.
- Apply it to a later year's limit. The excise tax still applies for 2027.
- Recharacterize a 2027 income-limit excess as a traditional IRA contribution by the same deadline.
The Five-Year Rule That Controls Tax-Free Withdrawals
Contributions come out tax-free and penalty-free at any time. Earnings come out tax-free only after age 59½ and five tax years. The clock starts on January 1 of the year of your first Roth IRA contribution. A 2026 contribution made by April 15, 2027 starts it on January 1, 2026, so earnings qualify from January 1, 2031. IRS Publication 590-B has the full rules.
A conversion has its own five-year clock, and it only matters for the early-withdrawal penalty before age 59½. A 57-year-old who converts in 2027 can take that amount penalty-free from January 1, 2032, or at 59½ if sooner.
An inherited Roth IRA uses the original owner's start date.
Required Minimum Distributions: The Roth Advantage
Traditional IRAs force required minimum distributions (RMDs). They start at age 73 if you were born from 1951 through 1959 and at 75 if you were born in 1960 or later, as the IRS RMD rules explain. Roth IRAs have none during the owner's lifetime. Roth 401(k) and 403(b) accounts have had none since 2024.
An RMD is the prior year-end balance divided by an IRS life expectancy factor. In 2027, a 75-year-old with $500,000 uses a factor of 24.6, so the RMD is $20,325. Miss a 2027 RMD and the penalty is 25% of the shortfall, reduced if you fix it within two years.
Someone born in 1962 who retires at 65 in 2027 has ten years to convert before RMDs start at 75.
Most Common Mistakes Retirees Make With Roth IRAs
Five mistakes cause most of the penalties and lost savings.
Contributing Without Earned Income
The most common mistake is contributing with no earned income at all. A retiree who lives on $60,000 of Social Security and a pension in 2027 has no compensation, so every dollar put in is excess.
It can run for years. Someone who puts in the full age-50 cap every year for five years at the 2027 limit builds $43,000 of excess. The excise tax is charged on the running total each year: $516, then $1,032, $1,548, $2,064 and $2,580. That adds up to $7,740 at the 2027 limit.
Custodians do not check whether you have compensation before they accept a contribution. They report each one to the IRS on Form 5498. Many people learn of the problem only when a tax preparer asks where the money was earned.
Exceeding Income Limits
High earners sometimes contribute without checking the limit. For 2027, a single retiree with $175,000 of MAGI is above the cutoff, so a full under-50 contribution for 2027 is all excess.
Uneven income is the usual cause. A retiree plans on $160,000 of 2027 MAGI and contributes the full 2027 limit in January. A $20,000 bonus arrives in November, and 2027 MAGI ends at $180,000. Many people learn this only when their tax software flags a penalty. That is why some wait until December, or early the next year, to contribute when income is close to the line.
The fix is to withdraw the excess with its earnings, or recharacterize it as a traditional IRA contribution, before the correction deadline.
Ignoring the Five-Year Rule
Many retirees think age 59½ opens up everything in a Roth IRA. Age removes the early-withdrawal penalty. It does not make earnings tax-free unless the five-year test is also met.
A 65-year-old who opens a first Roth IRA with a large conversion in 2027 cannot take the earnings tax-free for five years. A retiree in that 2027 bracket who withdraws earnings early pays $3,600 in federal tax, plus any state tax.
Failing to Maximize Spousal Contributions
Working retirees often fund only their own account.
The cost of skipping it grows. At a 7% annual return, it grows to about $118,800.
The mistake comes from thinking each spouse needs a paycheck. The couple only needs a joint return and enough compensation to cover both contributions. Each spouse opens a separate account.
Missing Conversion Opportunities
Many retirees assume that no job means no Roth activity. A fully retired 68-year-old with $400,000 in a traditional IRA can convert part of it every year.
The years between retirement and RMDs are the best window. A 65-year-old who retires in 2027 has ten years before RMDs start at 75. Converting that amount each year moves $400,000 into a Roth.
The upfront tax scares people off. That conversion taxed at 22% costs $6,600 today. In return, the growth and later withdrawals are tax-free, and future RMDs are smaller.
Dos and Don'ts for Retirement Roth IRA Strategy
These habits keep contributions legal and conversions cheap.
Do Track All Income Sources Carefully
Keep a record of every income source and label it earned or unearned. Wages and self-employment income are earned. Social Security, pensions and investment income are not. Good records prove your eligibility if the IRS asks years later.
Form W-2 and Form 1099-NEC document earned income. If you are self-employed, keep Schedule C and Schedule SE. Schedule C shows your net profit, and Schedule SE shows the self-employment tax that reduces it.
Do Calculate MAGI Before Contributing
Roth MAGI is not the same as adjusted gross income (AGI). You start with AGI and add back a few items:
- The student loan interest deduction
- The foreign earned income exclusion and the foreign housing exclusion or deduction
- Excluded interest from U.S. savings bonds
- Excluded employer adoption benefits
- Any traditional IRA deduction
You also subtract income from Roth conversions and rollovers. A conversion never counts against your right to contribute. Worksheet 2-1 in Publication 590-A does the math. Run it early in the year if your income is close to the range.
Several new deductions for 2025 through 2028 do not help here. The senior deduction of up to $6,000, and the deductions for qualified tips, overtime pay and car-loan interest, are all taken after AGI is figured. They lower taxable income but not Roth MAGI. Tips and overtime are still wages, so they count in full as compensation.
Do Consider Roth Conversions During Low-Income Years
The years after you stop working and before Social Security and RMDs begin are often your lowest-income years, and the cheapest time to convert.
For 2027, the standard deduction for a joint return is $33,200, up from $32,200 for 2026. Each spouse 65 or older adds an extra standard deduction and the senior deduction. A couple with no other taxable income can convert up to their total deductions and owe no federal income tax.
That works only with little other taxable income, and taxable Social Security counts. The senior deduction phases out above 2027 MAGI of $150,000 on a joint return, or $75,000 for a single filer, and conversion income raises that MAGI. Past the deductions, the 2027 joint 12% bracket runs up to the next bracket's threshold.
Do Establish Both Spouse Accounts When Eligible
If one spouse works and the other does not, fund a Roth IRA for each. At the 2027 limit for savers 50 or older, two accounts take in $86,000 more than one account over ten years.
Each spouse controls their own account. The non-working spouse chooses investments, names beneficiaries and decides when to withdraw. That gives the couple more room in retirement and estate planning.
Do Withdraw Excess Contributions Immediately
Act as soon as you find an excess. The penalty-free deadline is your return due date including extensions.
Call the IRA custodian and ask for a return of excess contribution, not a normal withdrawal. Most large brokerages handle it within a few business days. The custodian figures the earnings tied to the excess and sends both out together.
Don't Contribute Based on Investment Income
A retiree with $200,000 a year in dividends and gains has no compensation. No amount of investment income changes that.
This rule catches many well-off retirees. To keep the right to contribute, they need part-time work, consulting or a small business.
Don't Ignore the Pro Rata Rule for Backdoor Roths
A backdoor Roth with large pre-tax IRA balances brings a surprise tax bill. The rule taxes a conversion in proportion to all of your traditional IRA money, not just the dollars you move.
A retiree with $95,000 of pre-tax IRA money in 2027 who adds a nondeductible contribution has the combined total in the pool. Converting that nondeductible amount in 2027 creates $4,750 of taxable income, because 95% of it is treated as pre-tax. The calculation is reported on Form 8606. The extra income can push you into a higher bracket and raise Medicare premiums.
Don't Wait Until Year-End to Address Excess Contributions
Some retirees sit on a known excess, hoping to qualify later in the year. The withdrawal takes time, since the custodian must approve it, figure earnings and issue tax forms.
Start within days of finding it. If you miss the extended due date, fix the excess anyway, because a late correction still stops future excise tax charges.
Don't Assume Age Eliminates All Roth IRA Rules
Neither a traditional IRA nor a Roth IRA has an age limit on contributions, and the old age 70½ cutoff for traditional IRAs is gone. Both still require earned income.
A 75-year-old needs wages, self-employment income or a working spouse's pay to contribute. The Roth income limits also apply at every age.
Don't Overlook Roth IRAs for Estate Planning
A Roth IRA is also an inheritance tool. Heirs receive qualified Roth distributions tax-free, while a traditional IRA is taxed to them as ordinary income.
A child who inherits a $500,000 Roth IRA in 2027 keeps the full amount. The same sum in a traditional IRA could cost $150,000 to $175,000 in 2027 income tax for a child in a high bracket.
Under the rules for 2027, most non-spouse beneficiaries must empty an inherited Roth IRA within 10 years. No annual withdrawals are required inside that period, and the money comes out tax-free. A surviving spouse can treat the account as their own.
| Strategy Element | Recommended Action |
|---|---|
| Income Tracking | Document all W-2 and 1099-NEC income monthly |
| MAGI Calculation | Project MAGI by October each year |
| Spousal Contributions | Open accounts for both spouses if eligible |
| Conversion Timing | Convert during low-income gap years |
Comparing Roth and Traditional IRA Strategies for Retirees
A traditional IRA contribution may be deductible now, and withdrawals are taxed later. A Roth gives no deduction, but qualified withdrawals are tax-free. A 67-year-old with 2027 consulting income who funds a Roth gets no write-off but never pays tax on its growth.
The 2027 deduction phase-out is $83,000 to $93,000 of MAGI for a single filer covered by a workplace plan and $133,000 to $153,000 for joint filers when the contributing spouse is covered. When only the other spouse is covered, it matches the 2027 joint Roth range. If neither spouse is covered, there is no income limit.
A low bracket now, such as 12% in 2027, favors the Roth. A high bracket now favors the deduction.
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Current tax treatment | Contributions may reduce current taxes | No current deduction |
| Withdrawal taxation | All withdrawals are taxed | Qualified withdrawals are tax-free |
| Income limits (2027) | Deduction phases out if you or your spouse has a workplace plan | Contributions phase out at the 2027 MAGI ranges |
| RMDs | Start at age 73 or 75 | None during the owner's lifetime |
Qualified Distribution Rules That Determine Tax Treatment
A Roth withdrawal is fully tax-free when it is a qualified distribution. That takes the five-year clock explained earlier plus one event: age 59½, disability, death or a first-home purchase, with the first-home lifetime limit that still applies in 2027.
Dollars leave in order: contributions, then conversions, then earnings. A retiree with a pool of contributions and $20,000 of earnings in 2027 can take those contributions tax-free at any age.
Earnings are where the test bites. A 62-year-old who opens a first Roth IRA and withdraws earnings at 63 owes income tax on them because five years have not passed, but no early-withdrawal penalty.
Pros and Cons of Contributing to Roth IRAs After Retirement
The trade-offs sit side by side below.
| Advantage | Disadvantage |
|---|---|
| Tax-free growth: qualified withdrawals are never taxed | Earned income required: no wages or self-employment income, no contribution |
| No forced distributions: no RMDs during the owner's lifetime | Strict income limits: high earners cannot contribute directly |
| Flexible contributions: withdraw them anytime, tax-free and penalty-free | No current deduction: you pay tax on the dollars today |
| Superior inheritance: passes tax-free to beneficiaries | Five-year wait: earnings are not tax-free before it ends |
| Medicare premiums: qualified Roth withdrawals are not counted in the MAGI used for IRMAA | Annual contribution caps: slower build-up than a taxable account |
Three Real-World Scenarios: From Part-Time Work to Full Retirement
Each example below uses 2027 figures.
Scenario 1: The Part-Time Retail Worker
Janet is 64, single and retired. In 2027 she receives a $45,000 pension and $18,000 of Social Security, and she earns $15,600 in wages at a bookstore.
Only the wages count as compensation. For 2027 MAGI, only the taxable 85% of her Social Security counts, or $15,300. Her 2027 MAGI is about $75,900, far below the point where the 2027 single phase-out starts.
She can contribute the full $8,600 for 2027, about $717 a month from her paychecks.
She is under full retirement age and working, so the earnings test applies. Her 2027 wages are under the 2027 exempt amount, so no benefits are withheld.
| Financial element (2027) | Amount | Tax treatment |
|---|---|---|
| Pension income | $45,000 | Taxable ordinary income; does not qualify |
| Part-time wages | $15,600 | Qualifies for Roth contribution |
| Social Security | $18,000 | About $15,300 taxable; does not qualify |
| MAGI | About $75,900 | Below the $158,000 phase-out start |
| Roth contribution allowed | $8,600 | After-tax money that grows tax-free |
Scenario 2: The Self-Employed Consultant Couple
Robert and his spouse are both over 50 and file jointly. Robert consults part-time. In 2027 he bills $35,000 and nets $32,000 after expenses. The couple also has a $40,000 pension, $65,000 of investment income and $48,000 of Social Security.
Robert's self-employment tax is $32,000 x 92.35% x 15.3%, or about $4,522. Half is about $2,261, so his compensation is about $29,739.
Their MAGI is about $175,539. That is the $29,739 of net earnings, the $40,000 pension, the $65,000 of investment income and $40,800 of taxable Social Security, which is 85% of $48,000. It is well under the point where the 2027 joint phase-out begins.
Robert's compensation covers both accounts. They can contribute $8,600 each, or $17,200 for 2027. Ten years at that pace puts $172,000 into Roth IRAs.
| Scenario element (2027) | Value | Consequence |
|---|---|---|
| Robert's consulting income | $35,000 | About $29,739 of compensation after expenses and half of self-employment tax |
| Combined MAGI | About $175,539 | Below $250,000, so full contributions are allowed |
| Total contributions | $17,200 | $8,600 to each spouse's Roth IRA |
Scenario 3: The Fully Retired Investor
Michael is 75, born in 1952, and no longer works. In 2027 he gets $55,000 from Social Security, a $120,000 RMD from his traditional IRA and $75,000 of investment income. At the age-75 factor, that RMD implies an IRA of about $2.95 million.
None of his $250,000 of 2027 income is compensation, so he cannot contribute.
He can still convert. The 2027 RMD must come out first and cannot be converted. If he then converts $40,000, he pays ordinary income tax on the full $160,000 at his 2027 single-filer rates.
Ten years of $40,000 conversions from 2027 move $400,000 into Roth status, shrinking later RMDs and leaving his children tax-free money. The extra income can raise Medicare premiums two years later.
| Income source (2027) | Annual amount | Roth contribution impact |
|---|---|---|
| Social Security | $55,000 | Does not qualify |
| Traditional IRA RMDs (age 75) | $120,000 | Does not qualify |
| Investment income | $75,000 | Does not qualify |
What to Do Next
- Add up your 2027 earned income from box 1 of each Form W-2 and your Schedule C net profit.
- Estimate your 2027 MAGI with Worksheet 2-1 in Publication 590-A.
- Contribute no more than the smaller of your earned income or your age-based limit.
- Make any 2026 contribution before the April 2027 filing deadline.
- If you have no earned income, price a Roth conversion that fits your 2027 tax bracket.
FAQs
Can I contribute to a Roth IRA if I only receive Social Security?
No. Social Security benefits are unearned income and are not compensation under IRS Publication 590-A. You need wages or self-employment income to contribute. Roth conversions are still an option.
What happens if I contribute without earned income?
You create an excess contribution. The IRS charges a 6% tax every year it remains, reported on Form 5329, Part IV. To avoid the tax, withdraw the excess plus its earnings by your return due date, including extensions.
Can my working spouse contribute to my Roth IRA?
Yes. If you file jointly, the spousal IRA rule lets your spouse's earned income fund your account. For 2027, each of you can receive up to $8,600 at age 50 or older. The combined total cannot exceed the taxable compensation on your joint return.
Does rental property income qualify for Roth IRA contributions?
No. Rental income is passive and does not meet the compensation test in IRS Publication 590-A, no matter how much of the management you do yourself.
Can I convert a traditional IRA to Roth without earned income?
Yes. Conversions need no earned income and have no income limit. The converted amount is taxable in the year you convert. If you are subject to RMDs, that year's RMD must come out first and cannot be converted.
How much can I contribute if I earn $5,000 from part-time work?
Up to $5,000. You can contribute your earned income or the annual limit, whichever is less. The 2027 limit is $7,500, or $8,600 at age 50 or older.
Do pension payments count as earned income for Roth IRAs?
No. Pension payments are retirement benefits and do not count as current compensation. They are unearned income.
Can I contribute to a Roth IRA at age 75?
Yes. Roth IRAs have no age limit for contributions if you have earned income and stay below the income thresholds.
What if I earn too much to contribute directly?
Use the backdoor Roth: contribute to a traditional IRA, then convert it to a Roth. You still need earned income for the contribution. Pre-tax money in any traditional IRA triggers the pro-rata rule and makes part of the conversion taxable. Report both steps on Form 8606.
Can military retirement pay fund Roth IRA contributions?
No. Military retirement pay is a pension and is not earned income. Active-duty pay does count, including tax-free combat pay.
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