I posted this question earlier but it seemed to get wiped out in the website move. Sorry if you already responded and I missed it:
Anyone considering contributing to an IRA after reaching FI/RE? This scenario seems like it would make sense mathematically, you'd just give up some possible flexibility in return:
Assume you are FI/RE, married, living on a $40,000 annual budget. You (or your spouse) earn earn at least $10,000/year in side income, so you meet the criteria for both being able to contribute to an IRA. Without the side income, you would withdraw $40,000 from your stash to meet expenses. With side income, you only need to withdraw $30,000. Rough estimate is that you'd pay approximately $1000-2000 in income taxes on your stash withdrawals and side income.
But instead of withdrawing only $30,000 from your stash, you could still withdraw $40,000 to meet expenses, and put all the side earnings ($10,000) into IRA's. You would then get the tax break from the IRA contributions -- probably worth about $1000 - $2000 annually -- effectively wiping out your income tax. The downside of course is that the money you contributed would be tied up in the usual ways for tax advantaged accounts. You'd have to go through the various loopholes to pull it out early, or plan accordingly to have enough in non-tax advantaged accounts before age 59.5. Does this make sense to do? Am I missing any other obvious drawbacks?