Contributions in Retirement

Here’s a question that a lot of older Americans ask themselves from time to time: I’m over age 65.  Can I still make a contribution to an IRA or a Roth IRA?  Can I reinvest some or all of my required minimum distribution in an IRA or a Roth IRA?

The answer, generally, is that you can continue to make annual IRA or Roth IRA contributions, up to a total of $6,500, only if you have earned income sufficient to cover the contribution.  In other words, if you live totally on Social Security, annuity payments, portfolio income, required minimum distributions and/or a pension plan, then you cannot contribute.  Income from rental properties is also considered passive income.

But if you earn $5,000 in a year

through self-employment or from an employer, then you can make a $5,000 contribution, and no more.  If you earn more than $6,500, you can make the full contribution.  The caveat is that once you pass age 70/1/2, you can no longer make contributions to a traditional IRA; only to a Roth.

And there are income limits that apply no matter what your age.  You can make your deductible traditional IRA contribution, assuming you are below age 70 1/2, if your modified adjusted gross income is below $63,000 (single filer) or $101,000 (joint), with phaseouts thereafter that limit and finally eliminate your ability to deduct the contribution.  Single filers earning less than $120,000 or joint filers below $189,000 can make the full Roth contribution, and their ability to contribute phases out after that.

Complicated?  Of course it is.  The traditional and Roth IRAs were created by Congress, after all.

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