Making Roth IRA and After Tax 457 Plan Contributions in Retirement

Although retired, we still plan to make contributions to our retirement savings accounts. In 2010, I earned enough money at my part time jobs to make the maximum contributions to my Roth IRA and a spousal Roth IRA. Also, I am able to make additional after tax contributions to a public employee retirement (457) plan.

Here are the reasons for contributing:

Tax benefits - Earnings and withdrawals from a Roth IRA are tax free. Given a choice between saving in a Roth IRA or taxable savings account, the decision is an easy one. Earnings in the 457 plan are tax free, but will be taxed when withdrawn.

Fund reallocation - We have the funds needed to make the maximum contributions. The money will be taken from our long term savings which are currently in taxable accounts.

Fund availability - After tax contributions to a Roth IRA or a public employee retirement plan can be withdrawn at any time without paying taxes or penalties. Thus, we have the flexibility to use the funds should the need arise.

Our plan is to make our 2010 Roth IRA contribution in 2011 by April 15. The additional after tax contribution to my employee retirement plan will be made before the end of 2010.

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This is not financial, saving or retirement advice. Please consult a professional advisor.

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