Contributing to retirement accounts in retirement

Retirement does not have to end your relationship with tax-advantaged accounts. If you still earn income from part-time work, consulting, or a small business, you can keep contributing to retirement accounts well past traditional retirement age. For many retirees, this opens up meaningful tax breaks that often get overlooked.

The benefits multiply when you have significant cash or assets sitting in taxable form. Most people assume retirement account contributions must come out of a paycheck. In reality, the rules work differently.

How earned income unlocks contribution room

To contribute to an IRA or 401(k), you need earned income. The dollars actually going into the account can come from anywhere, including savings, a brokerage account, an inheritance, or proceeds from a home sale. The paycheck qualifies you to contribute, and any source can fund the contribution itself.

A reasonable next question is whether you should. Traditional contributions are usually taxed on the way out, so contributing today only to pay tax later requires a real reason. Three reasons stand out for retirees, and they apply at different income levels.

Tax rate arbitrage

A Traditional contribution pays off when your marginal tax rate today is higher than the rate you will pay when the money comes out. Higher-earning retirees with a windfall year often fit this profile. Part-time income stacked on pensions, Social Security, RMDs, an inherited IRA distribution, severance, or proceeds from a home or business sale can push you into a higher bracket today than your baseline retirement bracket. A deductible contribution shaves the top off this year’s income. The same logic applies to Roth conversions, covered below in reverse.

A retiree who inherited an IRA faces the SECURE Act’s 10-year drain rule for non-spouse beneficiaries, which forces taxable distributions on a tight schedule. Contributions in those same years can offset a portion of that forced income.

Tax-deferred growth runway

Even when your current and future tax rates match exactly, the contribution still wins on growth. A retiree in their early 60s sitting in the 12% bracket who contributes to a Traditional IRA at 12% and later withdraws at 12% breaks even on rate arbitrage. Years or decades of tax-deferred compounding inside the account is the real benefit. With a Roth, all of that growth comes out tax-free instead. This is often the strongest case for less-affluent retirees who would not otherwise meet a tax-arbitrage bar.

Estate optimization

Affluent retirees who do not need the money for income can use contributions, especially Roth contributions, to shift taxable assets into accounts that heirs inherit tax-free. Heirs still face the 10-year drain rule, but they pay no income tax on Roth withdrawals. Passing $100,000 of Roth IRA to children in their peak earning years is worth considerably more than $100,000 of taxable brokerage. A Traditional contribution offers less estate value, since heirs will pay their own marginal rate on withdrawals.

When to think twice

Three situations make contributions less attractive:

• Low bracket today with a higher bracket expected later. Traditional contributions are the wrong tool here. A Roth contribution still works, since it locks in today’s lower rate
• Liquidity needs within a few years. Tax-advantaged accounts have access friction. Locking up dollars you will need soon for living expenses makes little sense
• A state tax change on the horizon. Contributing while living in a no-income-tax state and withdrawing later from a high-tax state can flip a good federal trade into a poor overall one

For many retirees, a Roth contribution sidesteps the “tax on the way out” question entirely. The decision then narrows to whether you have better uses for the dollars today.

To make this concrete, consider a 67-year-old with $500,000 in a taxable brokerage account who picks up part-time work paying $25,000. That earned income unlocks a full IRA contribution. Funding the IRA from the brokerage account shifts $8,600 per year from a taxed environment to a tax-advantaged one. Over a decade, that is $86,000 in shifted assets, plus all the tax-deferred or tax-free growth on top. With a Solo 401(k), the figures get much larger.

With that framing in mind, here are seven tactics worth knowing about.

1. Fund a Traditional IRA with earned income

The SECURE Act of 2019 removed the age cap on Traditional IRA contributions. Before that law passed, contributions had to stop at age 70½. Now, as long as you or your spouse have earned income, you can contribute at any age.

For 2026, the contribution limit is $7,500, with an additional $1,100 catch-up contribution available if you are 50 or older. That brings the total to $8,600 for most retirees.

A Traditional IRA contribution may be fully or partially deductible depending on your income and whether you or your spouse is covered by a workplace retirement plan. Even a partial deduction reduces your taxable income for the year.

The clearest benefit shows up in the early-to-mid 60s, before required minimum distributions begin at age 73. You get the immediate deduction plus tax-deferred growth for a decade or more before RMDs start eating into the balance. The benefit narrows once RMDs kick in, though it still has value. The year-of-contribution deduction matters whenever you expect to be in a similar or higher tax bracket later, or whenever your heirs would be.

2. Use a Roth IRA for long-term tax-free growth

Roth IRAs share the same contribution limits as Traditional IRAs, with tax treatment that runs the opposite direction. You pay tax now and withdraw tax-free later. The benefits are largely long-term and estate-focused, and they can be substantial.

Roth IRAs have no required minimum distributions during the owner’s lifetime. The account can keep compounding tax-free for as long as you live. For retirees who do not need the money for income, this offers a meaningful advantage over a Traditional IRA.

Heirs inherit a Roth with the same 10-year drain rule, and all withdrawals come out tax-free. Passing $100,000 of Roth IRA to children in their peak earning years is worth considerably more than $100,000 of Traditional IRA, because the children avoid paying their marginal tax rate on every dollar.

A Roth also adds tax diversification. Having both pre-tax and post-tax buckets gives flexibility year by year. If a large expense or Roth conversion would push you into a higher bracket, you can pull from the Roth instead. It also hedges against future tax rate increases.

Roth IRAs do have income limits. For 2026, single filers can make full contributions if modified adjusted gross income falls below $153,000, with a phase-out up to $168,000. Married couples filing jointly have a phase-out range of $242,000 to $252,000.

3. Use a Spousal IRA when only one of you earns

If you are retired while your spouse still works, or vice versa, the working spouse’s income can fund an IRA for both of you. This is called a Spousal IRA, and it is one of the easier ways to double your annual tax-advantaged savings as a couple.

The rules are straightforward. You must file jointly, and the working spouse must have enough earned income to cover both contributions. Each spouse has their own account with its own contribution limit.

4. Use a Solo 401(k) if you have self-employment income

Part-time consulting, freelance work, or a small business can support much larger contributions than an IRA. A Solo 401(k) is designed for self-employed individuals with no employees other than a spouse.

For 2026, you can contribute up to $24,500 as an employee, plus an additional $8,000 catch-up if you are 50 or older. On top of that, you can contribute roughly 20% of your net self-employment earnings as the “employer” portion. Total contributions can reach $72,000, or $80,000 with the catch-up.

A Solo 401(k) offers several advantages beyond the higher limit:

• A Roth option exists. Most Solo 401(k) providers offer a Roth component, so high earners locked out of Roth IRAs by income limits can still get Roth treatment
• No income limits on deductibility. Traditional IRA deductions phase out for higher earners covered by a workplace plan. Solo 401(k) deductions do not
• Loans are available, which is not possible with an IRA
• No interference with backdoor Roth strategies. Traditional IRA and SEP-IRA balances can trigger pro-rata taxation on backdoor Roth conversions. Solo 401(k) balances do not

Even modest self-employment income can support meaningful contributions. A retiree earning $50,000 from a consulting practice could potentially shelter a large portion of that income through combined employee and employer contributions.

5. Consider a SEP-IRA for simpler self-employment savings

A SEP-IRA is the simpler cousin of the Solo 401(k). There are fewer administrative requirements, no Form 5500 filing until the account grows large, and the same employer-side contribution percentage applies.

The trade-offs are real. A SEP-IRA has no employee-side contribution, no catch-up contributions, and was historically pre-tax only. If you have meaningful self-employment income and want to maximize tax-deferred savings, the Solo 401(k) usually wins. If you have modest income and want minimal paperwork, the SEP-IRA can be a good fit.

6. Fund an HSA while you still can

Health Savings Accounts rank among the most tax-advantaged accounts in the U.S. tax code. Contributions are deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

There is a catch for retirees. You cannot contribute to an HSA once you enroll in Medicare. If you are delaying Medicare enrollment because you are still working and covered by a high-deductible health plan, you can keep contributing. For 2026, the limit is $4,400 for self-only coverage and $8,750 for family coverage, with an additional $1,000 catch-up for those 55 and older.

After 65, HSA withdrawals for non-medical expenses are taxed like a Traditional IRA, with no penalty. The HSA effectively functions as a second retirement account with extra tax-free potential for healthcare costs.

7. Convert traditional balances to Roth strategically

Roth conversions are a separate tool, and they belong in any conversation about retirement-year tax planning. A conversion moves money from a Traditional IRA or 401(k) into a Roth IRA. You pay income tax on the converted amount in the year of the conversion.

The window between retirement and the start of Social Security and required minimum distributions is often called the “conversion sweet spot.” Income is typically lower during these years, which means lower marginal tax rates on converted amounts. RMDs start at age 73 under current law, so the early-retirement years offer a planning window of several years.

The math gets complex quickly. Conversions interact with Medicare premiums through IRMAA surcharges, Social Security taxation, and your heirs’ eventual tax brackets. Done well, they save tens of thousands of dollars over a retirement. Done poorly, they create unnecessary tax bills.

Why this kind of planning matters

These decisions interact with each other. Roth conversions affect Medicare premiums. HSA contributions depend on healthcare coverage. Solo 401(k) and SEP-IRA choices depend on the structure of your self-employment income. An inherited IRA forcing distributions changes the math on everything else.

None of this is a problem for retirees who think about it deliberately. It becomes a problem when these decisions get made in isolation, often at tax time, without considering how they fit together over a multi-year window. This is the difference between tax planning and tax preparation.

If you are wondering whether some of these tactics apply to your situation, we are happy to talk through it. Magnifina works with retirees and pre-retirees on questions like these as part of broader financial planning.

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