Even if you have retired and are receiving a pension, you won’t be disqualified from contributing to an IRA. As long as you’re younger than 70 1/2 and you have earned income, you still can contribute to an IRA. This year, the maximum IRA contribution is $3,000, plus an extra $500 for those 50 and older.
Your IRA contribution may be deductible, if you’re a single taxpayer who is not an active participant in an employer’s retirement plan. If you’re married and your spouse is covered by an employer’s plan, you can get a full deduction as long as your joint income is under $150,000.
Moreover, you may be able to make a much larger deductible contribution to a SIMPLE IRA or simplified employee pension (SEP) plan. In 2002, SEP contributions may be as great as $40,000, depending on future legislation.
Yet another option is to contribute to a Roth IRA instead of a traditional IRA. As long as your joint income is under $150,000, on a joint return, you and your spouse can contribute up to $7,000 this year. That contribution won’t be deductible but, after five years and age 59 1/2, all withdrawals are tax-free. There are no age limits so you can keep contributing to a Roth IRA as long as you keep working.
