IRA contributions in retirement

[amcnj]

There are limits to deductibility of IRA contributions based on whether or not you are covered by a retirement plan at work. In the case of someone who retired from a job that had a retirement plan, but now in retirement works at another job without any such plan, do they still fall in the category of having a retirement plan at work based upon their previous job? Even though they now have no retirement plan “at work”?

 

[Yinn]

There are limits to deductibility of IRA contributions based on whether or not you are covered by a retirement plan at work. In the case of someone who retired from a job that had a retirement plan, but now in retirement works at another job without any such plan, do they still fall in the category of having a retirement plan at work based upon their previous job? Even though they now have no retirement plan “at work”?

**Not a tax professional. But it seems to be like this page (https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan) may answer your question.

The page says that Box 13 on your W-2 is the indication as to whether you're covered by a retirement plan for your current job.

There's also bullets to help you determine if you're considered covered under a plan or not.

Again..not a tax professional and not licensed to give financial advice so consult your tax professional.

 

[amcnj]

**Not a tax professional. But it seems to be like this page (https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan) may answer your question.

The page says that Box 13 on your W-2 is the indication as to whether you're covered by a retirement plan for your current job.

There's also bullets to help you determine if you're considered covered under a plan or not.

Again..not a tax professional and not licensed to give financial advice so consult your tax professional.

Thanks for your input. A W-2 is for active employment. When retired you would receive a 1099-R for any retirement income and a W-2 for any post retirement employment. But say the current part-time job has no retirement plan, and issues a W-2 showing that, and the job retired from did have a pension plan, but now only issues a 1099-R. The current job does not have a pension plan but you are receiving income from a previous job that did have one. Hence my confusion as to which set of rules applies. I guess this may be a question for the IRS!

 

[georgina]

Thanks for your input. A W-2 is for active employment. When retired you would receive a 1099-R for any retirement income and a W-2 for any post retirement employment. But say the current part-time job has no retirement plan, and issues a W-2 showing that, and the job retired from did have a pension plan, but now only issues a 1099-R. The current job does not have a pension plan but you are receiving income from a previous job that did have one. Hence my confusion as to which set of rules applies. I guess this may be a question for the IRS!

Also not a tax professional, but I think the reason you can't contribute to an IRA while covered by a 401k type plan at work is that you would be double dipping, making deductible contributions to 2 plans at once. From the Investopedia article below, you are not allowed to make deductible IRA contributions while an ACTIVE participant in another plan, which varies based on what type of retirement plan you are talking about. Again, just my take. (Good luck trying to get the IRS to answer!)

https://www.investopedia.com/articles/retirement/05/032305.asp

 

[_19disnA]

My understanding is these are calendar year contributions/calculations. If you left the job with a retirement plan in 2019 (for example), then in 2020 working elsewhere that doesn't have a plan would be all that matters. I am not aware of any restriction on prior years employment. You have to have income from a current job in order to contribute to an IRA in that calendar year. If you work part of the year at both jobs is probably the only time this would matter. Might also ask your HR department and/or your financial advisor to be sure.

Traditional IRAs

• Retirement plan at work: Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels.
• No retirement plan at work: Your deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.

 

[seashoreCM]

Depends on what time of year you terminated or began employment at a company with an employer retirement plan, like you terminated in December and began a new job without an employer plan in January then you might not have your January and onward IRA contributions limited...

... the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. ... (IRS Publication 590-A)

 

[Yinn]

Thanks for your input. A W-2 is for active employment. When retired you would receive a 1099-R for any retirement income and a W-2 for any post retirement employment. But say the current part-time job has no retirement plan, and issues a W-2 showing that, and the job retired from did have a pension plan, but now only issues a 1099-R. The current job does not have a pension plan but you are receiving income from a previous job that did have one. Hence my confusion as to which set of rules applies. I guess this may be a question for the IRS!

I can't give financial/tax advice as I'm not licensed to do so. But here's what I'm looking at..

(https://www.irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan)

Specifically the top portion

"You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:"

So the first question I would ask is, who is your employer for this tax year?

A 1099-R indicates a distribution and income received, it doesn't indicate an employer. According to the IRS (https://www.irs.gov/retirement-plans/plan-participant-employee/definitions) Employer is generally any person for whom an individual performs or did perform any service, of whatever nature, as an employee.

So in the tax year, did you perform any service for the people who issued you a 1099-R? Are they considered your employer for the tax year?

I know my view on it, but again I'm not a tax professional. I don't have access to your financials. So there is no way for me to make a definitive statement on your specific situation. Only a tax professional with access to your specific finances can. But hopefully the above helps you.

 

[amcnj]

Thanks to all for the information and input. My feeling was that the “employer” would be only the current part-time non-retirement plan company. I was getting hung up on the fact that they are a member of a retirement plan, and in fact receive income from it. But it is not with the current employer, so I guess that is what is most important here.