I have been contributing to a 401K in my working years. When I retire and stop working (at 55yol), can I get a full deduction from my traditional IRA contribution? My income would be from capital gains, dividends and interests.
tj
No, because you have to have earned income to even make an IRA contribution. Earned income comes from a W2 or self employment. The investment income you mention is not earned income.
—Peter
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so I could still make a contribution to the traditional IRA but I will not get any deduction. Is that right?
so I could still make a contribution to the traditional IRA but I will not get any deduction. Is that right?
No. You are not allowed to make any IRA contributions - deductible or not - unless you have earned income. So if your total income is from dividends, capital gains and interest, you are not eligible for making any contribution to an IRA.
AJ
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so I could still make a contribution to the traditional IRA but I will not get any deduction. Is that right?
You already got the correct answer (“No,” because you didn’t have earned income), but if you have money burning a hole in your pocket that you want to use for an “IRA-like” purpose, consider using that money to pay the taxes on a partial Roth conversion of some current traditional IRA money.
You need to run your own numbers to see if it makes sense to shift the paying of taxes from later to now (rates, taxable IRA withdrawals pushing other income into a higher-taxed state, etc.).
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