Retirees,dont make this dumb mistake!

Thought we were be smart and contribute the max allowed for over 50's to our IRA'S. $6500 each so we thought we'd get a nice refund. Idiots we truly are ,you can only deduct IRA contributions against earned income meaning a job which means we cant deduct 1 cent. The worst part we found out is that you pay a yearly penalty ,almost$200 a year that this money stays in the IRA because it's considered an excess Ira contribution. To avoid this we have to withdraw all this money by april 15.

 

Jersey,
You are correct. I will be retiring in 4 months and sat down with a rep from Schwab to discuss my Roth IRA Account a few months ago. I am retiring a bit early and still wanted to contribute to my Roth. He told me that as long as I had no "earned" income I could not contribute to the Roth. This was the last year i could contribute.
There are a lot of rules related to these things and I would strongly suggest than any potential retiree sit down with a finance person for advice.
I am glad I did.

 

That's why you get a good investor that knows that stuff. If you used one then get a new one.
In the end, that sucks.

 

Canadians contributing to RRSP's face similar rules about needing earned income and should check with a financial advisor (not a banker) if they have or are about to retire.

 

Most of our investments are self-directed

Good or bad thats the way I prefer it. This was my own fault ,havent put any money in IRAS in quite a few years instead been taking out. I figured it was a good idea to put some back in and get a tax deduction . Live and learn.