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Even Retirees Working Part-Time Can Contribute to a Roth IRA

You can stash as much as you earned for the year in a Roth, up to $5,500 plus an extra $1,000 if you’re 50 or older.

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QI am retired, but I work part-time. Can I contribute to a Roth IRA? How much can I contribute if I just earned a few thousand dollars this year?

AAs long as you have earned income from a job, you can make contributions to a Roth IRA. You can contribute up to the amount of your earned income for the year, with a $5,500 maximum for 2016 (or $6,500 if you’re 50 or older). If you work and your spouse does not, you can even contribute up to $5,500 (or $6,500) to a spousal Roth IRA on his or her behalf – as long as your total contributions for both accounts don’t exceed the amount you earned from working. That means your earned income for the year would need to be at least $13,000 if you’re 50 or older and want to contribute the maximum for yourself and your spouse.

SEE ALSO: 10 Things Boomers Must Know About RMDs on IRAs

To calculate your maximum contribution, include your earnings from working (such as wages, commissions, bonuses and self-employment income). Alimony and maintenance payments through a divorce are also included in the earned income calculation for determining Roth IRA contributions, says Keith McGurrin, a certified financial planner with T. Rowe Price. Pension and investment income, on the other hand, does not count.

There’s no maximum age for contributing to a Roth IRA (you must be under age 70½ to contribute to a traditional IRA). To qualify to make Roth contributions in 2016, your modified adjusted gross income must be below $132,000 if you’re single or $194,000 if you’re married filing jointly (the contribution amount starts to phase out if your income is more than $117,000 if single or $184,000 if married filing jointly). That “modified adjusted gross income” figure to determine if you earn too much to contribute to a Roth is calculated differently than the earned income figure used to determine how much you can contribute. See IRS Publication 590-A for the full calculation.

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You have until April 17, 2017, to contribute to a Roth IRA for 2016. For more information about the benefits of a Roth IRA, see Why You Need a Roth IRA.

Retirees who want Roth IRA benefits but earn too little to make the full contribution may want to convert money from a traditional IRA to a Roth, says McGurrin. There are no minimum or maximum income limits for Roth conversions; you just need to pay taxes on the converted amount (or on a portion of the converted amount, if you made some nondeductible contributions through the years). See Rules for Converting Money From a Traditional IRA to a Roth for more information.

SEE ALSO: 10 Things You Must Know About Roth Accounts

Got a question? Ask Kim at askkim@kiplinger.com.