Can I Open an IRA If I'm Retired?

Whether due to financial need, internal drive or out of boredom, many workers continue to earn money even after they retire. Some people plan their work lives to retire as early as age 60, and others may find themselves "retiring" earlier than expected because of job loss. . IRS regarding traditional and Roth IRAs differ. Whether you can open an account after retirement depends on which type of account you want.


You are eligible to open an IRA if you are retired. That being said, you can no longer contribute to a traditional IRA once you reach the age of 70 1/2.

Exploring Earned Income

The Internal Revenue Service restricts individual retirement account ownership to those with earned income. Social Security, pension, annuity and disability payments do not qualify under IRS rules. Investment income does not qualify either. Wages, commissions, salaries and tips, in addition to taxable military pay and alimony, are considered earned income.

Assessing the IRA Contribution Limit

After age 50, you can put no more than $6,500 per year in your IRA(s). As regards contributions, the IRS sees all IRAs as one IRA. So if you have two IRAs, you can, for example, contribute $4,000 to one and $2,500 to the other. In addition, you can contribute no more than you earn. If you earn only $3,000 doing part-time work after retirement, for example, you can contribute only $3,000 that year.

Evaluating Traditional IRA Rules

You can neither open nor contribute to a traditional IRA after you reach 70 1/2. This is also the age at which you must start taking distributions from a traditional IRA.At age 59 1/2, you can begin taking penalty-free withdrawals from a traditional IRA. If you retire, for example, at age 60, you can open an account and never have to worry about the 10 percent early distribution penalty when you take money out of the account.

On the other hand, because of the age 70 1/2 rule, you will have only 10.5 years to contribute to the account. As traditional IRA contributions are tax-deductible, funding the account even over such a short term may be worthwhile.

Roth IRA Contributions

You can contribute to a Roth at any age. There are income limits to Roth IRA contributions, which for 2018 are $120,000 for single people and $189,000 for married couples filing jointly to make a full contribution. Single people with an adjusted gross income of $135,000 may make partial contributions, as can married couples filing jointly with an AGI of up to $199,000. With a Roth IRA, you do not ever have to withdraw any money.

If you do wish to make a withdrawal, however, as long as you have reached age 59 1/2, you can take both principal and earnings tax- and penalty-free. There are penalty-free exceptions to early withdrawal, as long as the account has been open at least five years. These include college education funding, up to $10,000 for first-home purchase, and unreimbursed medical expenses totaling more than 10 percent of your AGI.

The Roth IRA becomes a flexible savings and investment account during your retirement years. After you die, the account can pass to your heirs, who can take yearly distributions over their respective lifetimes. Roth IRA contributions are not tax-deductible.