My wife and I are no longer working and we've begun drawing on our portfolio for living expenses. Surprisingly, I may have a sweet income opportunity this year. A family member is starting a business that periodically requires some extra bodies. I can pick up about $4,000 for a week's work. If I earned $8,000 in 2019 I should just use that money for living expenses correct? Since I'm in the drawdown phase where I'm converting tIRA money to Roth to create most of my annual income and living off taxable accounts, I don't think it makes sense to contribute the money to a tax-deferred account. My earned income is low enough that I'm not paying any federal tax so there's not really much incentive for me to tax-defer. Plus that just means more money that I'm trying to migrate into the post-tax category. Pretty sure this is how I would handle it but we're just beginning the drawdown phase so I wanted to make sure I'm not missing anything.
Yeah, that's basically what I do. Just use it for living expenses, which will postpone the next portfolio draw for a little bit. I draw what I expect to be 3 months' expenses, and then see if I make it last longer than that (via spending less or outside income).
One thing you might want to look into is if it is worth contributing $2K to your (and spouse's if applicable) IRA. You may be able to get the Retirement Savings Tax Credit, which at a low income is 50% of the amount contributed.
Also, having income too low can be problematic. My income two years ago was low enough to where I lost out on some non-refundable credits.
EIC is a good tax credit but in my experience is very hard to qualify for. Still, check the rules and you might get it.
