Can I Contribute to an IRA With No Income?

By Justin Pritchard, CFP®

If you only work for part of the year, you may wonder if you’re allowed to make IRA contributions for that year. For example, you might retire in February—or you might not work at all during a given calendar year.

So, what does that mean for your ability to save for retirement? For example, you may want to add to your savings, as every dollar you set aside today  will come in handy later. Plus, you might want to take advantage of tax opportunities like making deductible IRA contributions or putting money in a Roth IRA for potential tax-free income later.

Two Ways to Make IRA Contributions

You still might be allowed to make an IRA contribution. There are two potential opportunities to explore, including a so-called spousal IRA contribution for married people.

Continue reading below, or watch this video with similar information:

Enough Earned Income

First, there’s no requirement that you work for the entire year. As long as your eligible earnings are sufficient, you can contribute to an IRA for the year.

That’s often the case when you have W2 income, and you can contribute up to the amount you earn or the annual limit, whichever is lower. Most people who work for an employer receive W2 wages, and you can look back at tax information from previous years to see if that’s the case for you. But even self-employed people can have income that counts for making contributions. In fact, eligible compensation can come from a variety of sources.

What types of income qualify for IRA contributions? The IRS has detailed instructions and a handy table in Publication 590. Earned income includes commissions, wages, alimony, and other payments that meet IRS criteria. But you can’t use interest and dividend income (among other things) to satisfy the income requirement for IRA contributions.

For 2022, you can contribute up to $6,000 to an IRA, and that amount rises to $6,500 for 2023.

Remember the catch-up contribution, as well. When you’re age 50 or older during a calendar year, you’re allowed to contribute extra for that year. This helps you maximize the amount in your retirement savings. For 2022 and 2023, that amount is an extra $1,000, so take advantage if you can. For workplace retirement accounts, the catch-up is even bigger, so look into those opportunities, as well.

Spousal IRA Contributions

Another solution might be a spousal IRA. While that’s just an informal term (there’s no official “Spousal IRA” contribution under the IRS code), it’s a way for married couples to save extra when at least one spouse has earned income for the year.

If a spouse earns enough money for contributions, that one person’s income can fund contributions for both spouses if you’re married and filing a joint return. Note that the income must be sufficient for both spouses if you’re both contributing. So, if your spouse earns $6,000 and contributes $6,000 to an IRA, there won’t be income left over for a contribution on your behalf.

All of the information above applies to pre-tax contributions as well as Roth IRA contributions. You can even make non-deductible contributions as long as you have the income to qualify. But remember that having too much income can disqualify you from getting a deduction for contributions. Likewise, income above certain levels might make you ineligible for Roth IRA contributions.

As always, it’s critical to double-check with your CPA before you make a contribution or file a tax return. Somebody who is familiar with your situation will know if anything might cause any problems, and this article is just general information to get that conversation started.