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Chas  R
Level 2

IRA deposits after retirement

Dear Experts,

Both my wife and I are retired Federal employees, have pensions and also receive Thrift Savings Plan (TSP) money calculated by TSP as RMD (the required withdrawal amounts.)  I also have a separate Roth IRA that has never been touched. Both of us are well past age 75.

 

In 2022, I worked for a private company in a part time/ temporary position with net pay of about $6,000. Can my earnings be contributed to either my TSP account or my Roth IRA and deducted from my gross income?  Does the TurboTax program for 2022 ask for/ include this information?   If there is a dollar limit to TSP contributions after retirement, can I pay income tax on earnings and deposit the funds into my Roth IRA.

 

Please know I appreciate your helpful ideas.


Best,

 

Charles Rademaker

Alexandria, Virginia

1 Best answer

Accepted Solutions
Opus 17
Level 15

IRA deposits after retirement

@Chas R 

You can't make contributions to your TSP account except via payroll deduction when you are employed by the government.   Since you are not employed by them any more, you can't make new TSP contributions.

 

You are allowed to contribute to either a traditional (pre-tax) or Roth IRA even after you have declared retirement.  You must have compensation from working, so even though the limit for IRA contributions over age 50 is $7000 per year, your maximum contribution would be $6000 if that's your income from working.  TSP withdrawals are taxable income but they are not "compensation from working" and can't be contributed to any kind of IRA. 

 

Turbotax does have a section where you can indicate that you made contributions to either a traditional or Roth IRA.  You are correct that if you contribute to the Roth IRA, the wages will still be included in your taxable income for 2022, but you won't pay tax when you withdraw funds from the Roth IRA. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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6 Replies
JandKit
Employee Tax Expert

IRA deposits after retirement

Hi Chas R,

You can make a contribution to a Roth TSA account at 75 and beyond. The amounts , however, can not be deducted from your income. The TSP account is only viable if it is a Roth TSP account. 

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Chas  R
Level 2

IRA deposits after retirement

I am not sure if we are 'on the same page' and hope you will clarify.

 

TSP (Thrift Savings Account) is run by the Federal Government.  All money deposited comes from earnings which are not taxed until funds are withdrawn. If I am reading your answer correctly, any of 2022 earnings should be taxed before they are deposited to my TSP - and will be taxed again when the funds are withdrawn.  What am I missing.

 

Also, isn't there a limit of $4,000 for TSP deposits?

 

If I pay tax on my 2022 earnings, can I then deposit them into my Roth IRA where there will be no tax when the funds are withdrawn.

 

Confused but grateful for your help.

 

Charles R

Opus 17
Level 15

IRA deposits after retirement

@Chas R 

You can't make contributions to your TSP account except via payroll deduction when you are employed by the government.   Since you are not employed by them any more, you can't make new TSP contributions.

 

You are allowed to contribute to either a traditional (pre-tax) or Roth IRA even after you have declared retirement.  You must have compensation from working, so even though the limit for IRA contributions over age 50 is $7000 per year, your maximum contribution would be $6000 if that's your income from working.  TSP withdrawals are taxable income but they are not "compensation from working" and can't be contributed to any kind of IRA. 

 

Turbotax does have a section where you can indicate that you made contributions to either a traditional or Roth IRA.  You are correct that if you contribute to the Roth IRA, the wages will still be included in your taxable income for 2022, but you won't pay tax when you withdraw funds from the Roth IRA. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

IRA deposits after retirement

Also, I suggest you edit your post (the 3 vertical blue dots next to the title) and redact your full name and  location.  This is a public forum visible to anyone. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

IRA deposits after retirement

It may be worth mentioning that prior to 2020, the maximum age to contribute to any kind of IRA was 70-1/2, but that limit was removed by the SECURE act. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
TaxandtheCurious
Employee Tax Expert

IRA deposits after retirement

Once you leave the federal government, unfortunately, you are no longer eligible to make employee contributions to your TSP. Now for the good news, you can use the earned income from your part-time work to contribute to your Roth IRA in 2022, if your Modified Adjusted Gross Income (MAGI) for the 2022 tax year is under $208,000. Roth contributions are not deductible but the qualified distributions are not subject to tax, so you would likely be subject to tax on the $6,000 of earnings.  Although not tax deductible, TurboTax software will ask you for your prior ROTH contributions and current year ROTH contributions in order to help you track your contributions/basis. Also, this contribution would not be subject to RMDs during the lifetime of the owner. If you are interested in a deducting the $6,000 contribution then you may want to consider and IRA contribution in lieu of a ROTH contribution. Assuming you are not covered by a retirement plan that you can contribute into thru your current part-time employer, there would not be an income limit to contribute to the IRA for 2022 and you could deduct the entire contribution. Keep in mind, you will pay tax upon withdrawal and it would also be subject to RMDs. Enjoy your retirement years!

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