You can still make IRA contributions if you don’t work for an entire calendar year—or even if you don’t work at all during a year, in some cases. As long as you or a spouse have eligible income for a given year, you’re allowed to make IRA contributions.

That may be helpful to know if you’re retiring early, or if you otherwise want to take advantage of tax features available from IRAs. For instance, you might want to get a tax deduction by making a pre-tax IRA contribution—saving you money on taxes for the current year. Or, you might prefer Roth IRA contributions, which can potentially lead to tax-free income in retirement.

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In this video, we explore the different types of earned income that allow you to make IRA contributions. Just remember that having too much income can complicate things. For example, you might not be allowed to deduct your contributions, or you might be disqualified from adding to a Roth IRA if your income is above certain levels.

RELATED TOPICS:
Should you contribute to Roth?    • The Logic Behind Roth IRA and Roth 40...  
Definition of compensation: https://www.irs.gov/publications/p590...
Catch up contributions: https://www.irs.gov/retirement-plans/...

Of course, this is all general information and is not specific tax advice. It’s critical that you review everything with a CPA before you decide to do anything (or nothing). Don’t base your decisions off of the information here, as there could be unwanted tax consequences if you move forward without getting more information.

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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.

IMPORTANT:
It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.