Common IRA Contribution Questions
by Alexis Gonzalez-del-Valle, CIP, CHSP
I have two clients, ages 16 and 78, who have part-time jobs. My 16-year-old client would like to contribute to a Roth IRA and my 78-year-old client would like to contribute to a Traditional IRA. Are there age restrictions for contributing to a Traditional or Roth IRA?
There is no minimum age requirement for Traditional or Roth IRA contributions. Anyone who has eligible compensation (generally income earned from working) may contribute to an IRA. Financial organizations should consult with their legal counsel on how to establish and manage an IRA for a minor. If allowed under state law, a parent or legal guardian may establish an IRA in the minor’s name. If the parent or legal guardian signs on the child’s behalf or co-signs the IRA documents, the financial organization should include the parent or guardian’s signature, along with the relationship to the child.
For tax years before 2020, a maximum age restriction applied to regular Traditional IRA contributions. Traditional IRA owners were not allowed to make regular contributions beginning with the tax year that they attained age 70½. The SECURE Act of 2019 eliminated this age restriction for Traditional IRA contributions. A maximum age restriction has never existed for Roth IRAs, but the Roth IRA owner must have modified adjusted gross income (MAGI) within certain limits.
My client, age 65, is retired. His spouse, age 60, is working and has an annual salary of $100,000. Can my client contribute to his own Traditional IRA?
There is an option to make a spousal IRA contribution, which allows an individual who has little or no eligible compensation to make Traditional or Roth IRA contributions to his own IRA based on his spouse’s income (all regular contribution rules apply). To be eligible for a spousal contribution, the following requirements must be satisfied.
The couple must be married and filing a joint federal income tax return.
One spouse must have eligible compensation.
Under the federal tax laws, a couple is generally treated as being married to each other if they are married on the last day of the tax year.
The regular contribution limit ($6,500 for 2023 and $7,000 for 2024, plus $1,000 catch-up contribution per year, if eligible) also applies to spousal contributions. For 2024, the maximum annual contribution for a married couple is $14,000 ($16,000 if eligible for catch-up contributions), but no more than $7,000 ($8,000 if eligible for a catch-up contribution) may be contributed to either IRA.
A Roth IRA owner will be age 50 on September 1, 2024. Can she make a catch-up contribution to her Roth IRA on May 1, 2024?
Yes, the Roth IRA owner can make her catch-up contribution on May 1, 2024. The first year for which an individual can make a catch-up contribution to a Traditional or Roth IRA is the year in which she turns age 50. An IRA owner who will turn age 50 before the end of the calendar year is eligible to make a catch-up contribution on or after January 1 of that year.
My client contributes to a 401(k) plan with his employer. May he also contribute to a Traditional IRA?
It is possible to contribute to a 401(k) plan and to a Traditional IRA. But because the client is an active participant in an employer-sponsored retirement plan, whether he can take a tax deduction for his Traditional IRA contributions depends on his federal income tax filing status and MAGI. IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), includes worksheets that guide taxpayers through the steps to properly calculate their MAGI and Traditional IRA deductions.
Traditional IRA owners who are not eligible to deduct their IRA contributions may still make Traditional IRA contributions—treated and reported by the taxpayer as nondeductible— if they are otherwise eligible. Contributing to a Roth IRA is another option for individuals who are not eligible to make deductible Traditional IRA contributions. It is possible to contribute the maximum amount to both a 401(k) plan and a Roth IRA.
