How Do I Keep Contributing to My IRA or Old 401K?

Losing a job, retiring, or stepping away from the workforce doesn’t mean you have to stop building your retirement savings. One of the most common questions people ask during life transitions is:

"Can I contribute to my 401K if I’m no longer employed?” 

Generally, the answer is no. But here’s what you need to know and how to keep your retirement on track:

• Old Employer’s 401(k): You cannot make new contributions once you leave your job. However, you can roll it over to a new employer’s plan or move it to an IRA.
  
  • If you move to a new employer's plan or establish your own small business plan, You can set up
  • If you move it to an IRA, you can make contributions if you have earned income.

Here are some key things to know when contributing to an IRA, what’s considered earned income,  and a few creative strategies to keep your retirement savings on track.

The Rules

What Counts as "Income"?

The IRS requires that you have earned income to contribute to a Traditional or Roth IRA. Earned income includes:

• Wages from a job (even part-time or freelance)
• Self-employment income
• Commissions or bonuses

But if you're no longer employed and have no earned income, you generally cannot contribute to an IRA, unless you qualify under one of the exceptions below.

Exceptions

1. Spousal IRA: An Option for Married Couples

If you're married and your spouse is working, you may still be eligible to contribute to an IRA through a Spousal IRA.

How it works:

• Your working spouse must have enough earned income to cover both contributions.
• You and your spouse must file a joint tax return.
• Contribution limits are the same for both spouses: up to $7,000 per person for 2025 ($8,000 if age 50 or older).
  
  

Example: If your spouse earns $100,000 and you are unemployed, the working spouse can contribute $7,000 to each spouse’s IRA for a total of $14,000 as long as you both file a joint tax return.

2. Part-time Ventures or Freelance Income

You do not need a full-time job to contribute to an IRA. Income from self-employment or freelance work generally qualifies as earned income for IRA purposes.

Examples include:

• Selling products online
• Consulting or contract work (e.g., Uber, DoorDash, IT projects)
• Offering part-time services such as tutoring, design, or pet-sitting
  
  

Tip: If you are self-employed, you may also be eligible for a SEP IRA or Solo 401(k), which offer significantly higher contribution limits than traditional or Roth IRAs. 

3. Commissions and Performance Bonuses

Even if you do not receive a regular salary, commissions and performance bonuses are considered earned income for an IRA. 

Examples include:

• Sales commissions from real estate, insurance, or other industries
• Performance-based bonuses from your employer
• Incentive pay for meeting or exceeding work targets
  
  

Tip: Any income earned from commissions or bonuses can be used to contribute to a Traditional or Roth IRA, up to the annual contribution limits.

Now that we’ve explored the sources of earned income that allow you to contribute to an IRA, you might be wondering what happens if your income comes primarily from investments or other passive sources.

Note - Income from the following does not count as earned income:

• Dividends and interest
• Rental income from owned real estate

  • Example: you own rental properties and are receiving rental income reported on your schedule of your tax return.

• Capital gains
• Pensions or Social Security
• Unemployment benefits
  
  

Unfortunately, passive income alone does not qualify for IRA contributions. However, if you already have an IRA, you can still let it grow and continue working for you.

Already Have an IRA?
Keep It Growing Without Contributions

Even if you’re no longer employed and can’t contribute right now, your IRA can still work for you. Here’s how:

• Maximize your IRA with alternative investments: Make the switch to a Self-Directed IRA (SDIRA) to invest in real estate, private equity, or other alternative assets, potentially boosting long-term returns. A transfer from one IRA to another IRA does not incur taxes.
• Convert to a Roth: If you're in a lower tax bracket after leaving work, consider converting some or all of your Traditional Self-Directed IRA to a Roth Self-Directed IRA to take advantage of tax-free growth.
• Reinvest dividends: Earnings inside your Self-Directed IRA can be reinvested, allowing your investments to continue growing tax-deferred (Traditional) or tax-free (Roth).
  
  

How IRAR Can Help

At IRAR, we specialize in Self-Directed IRAs, empowering individuals like you to grow their retirement wealth. Schedule a free, no obligation call to go over your unique strategy, the process, and how to save more than 50% on fees.

IRAR can help you keep growing your retirement savings, even during life’s transitions.
Schedule a free consultation.