Ladies lunching
Hinterhaus Productions/Getty Images

Should you fund your retirement even after you retire? The idea may seem counterintuitive, but for retirees still working part time, continuing to seed a tax-deferred individual retirement account can ensure that they have enough money to enjoy retirement long into the future.

“If it doesn’t harm the current lifestyle, having extra for the future is seldom a bad thing,” says Ilene Davis, a certified financial planner in Cocoa, Florida, and author of “Wealthy by Choice: Choosing Your Way to a Wealthier Future.”

For working retirees who want to contribute to an IRA, the question becomes how much to contribute and to which type of IRA. Earned income means money from a job; investment income doesn’t count. However, if you are retired and your spouse has earned income, he or she can contribute to their own IRA and also make what is called a spousal contribution to your IRA.

Keep in mind that once you begin to take required minimum distributions, or RMDs, from a traditional IRA at age 70 1/2, you can no longer contribute to a traditional IRA, says Richard E. Reyes, a certified financial planner at Wealth and Business Planning Group in Maitland, Florida. With Roth IRAs, there are no age restrictions for contributions.

The maximum you can contribute to a traditional or Roth IRA in 2018 is $5,500. If you are 50 or over, you’re allowed an additional contribution of $1,000, for a maximum of $6,500. You can make this contribution for the 2018 tax year up to the tax-filing deadline in mid-April.

Pros and cons

It doesn’t make sense to invest in an IRA in retirement if you can’t afford it. But if you can afford it, saving more money in tax-deferred accounts is beneficial, especially if you live a long time.

“It’s always optimal to save more for retirement so that you have more savings as you spend money through retirement,” says Ken Hevert, a senior vice president at Fidelity Investments who works in personal investing and wealth management.

Many retirees underestimate how much money they will need to get through retirement, especially with health care costs increasing. Hevert sees contributing to an IRA in retirement as a way to fund health care expenses, which rose to $10,348 per person in 2016, according to the Centers for Medicare and Medicaid Services.

If you’re able to save the maximum amount between the ages of 65 and 70, you can accumulate a tidy sum. For example, if you save $6,500 a year for each of the six years from age 65 to 70 — a total savings of $39,000 — by the time you turn 80, you’d have $63,819, assuming a 4 percent average real return (meaning over and above the inflation rate).

Roth vs. traditional IRA

Whether to use a Roth or a traditional IRA for those contributions depends on your tax situation. Hevert favors the Roth because there is no RMD, so funds can continue to grow throughout retirement and can be tapped later in retirement or left to heirs in an estate.

When contributing to an IRA on a pretax basis, you get the benefit of an upfront tax deduction. But some advisers don’t see the point of this strategy since the benefit is temporary.

“There could be some benefit to contributing to a traditional IRA if you are trying to save some dollars in taxes and you are still working,” Reyes says, “but I don’t really find that too appealing because it will be taxed shortly when you begin taking distributions.”

If you had an IRA through your employer’s retirement plan but have retired from that job, you can open one through investment firms such as Vanguard or Fidelity. Be sure to research different companies to find the right brokerage for you. Read Bankrate’s brokerage reviews to find the right firm for you.