IRA Contributions AFTER 70 1/2 years of age??

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mholdi1540
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IRA Contributions AFTER 70 1/2 years of age??

Post by mholdi1540 » Tue Apr 15, 2014 8:55 am

Two of my friends tell me that as long as they have worked and had an earned income after 70.5 years that they have still made IRA/401K/SEP-IRA yearly contributions. IS THIS TRUE?? I thought it all ended at 70.5 years (contributions, that is) and then the MRD kicked in after that. Any references to this?? Thanks for advice in advance...

sscritic
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by sscritic » Tue Apr 15, 2014 9:03 am

The IRS is good for tax questions.
You can’t make regular contributions to a traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.
A 401(k) is a different animal (an IRA is a 408, a Roth is a 408A). See what google can do for you.

dbltrbl
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by dbltrbl » Tue Apr 15, 2014 9:17 am

You must be under 70.5 years age to contribute in a traditional IRA. However, no age limit for ROTH IRA as long as other criterion satisfied. i.e. earned income.

dickenjb
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by dickenjb » Tue Apr 15, 2014 9:38 am

dbltrbl wrote:You must be under 70.5 years age to contribute in a traditional IRA. However, no age limit for ROTH IRA as long as other criterion satisfied. i.e. earned income.
Actually you don't even need earned income, just compensation. That includes W-2 income, self employment income, non taxable combat pay, alimony and separate maintenance payments (the last two are not earned income but rather payments)

My MIL is turning 80 this year and I have her contributing her alimony payments to her Roth each year.

To the OP:

Take a look at Pub 590.

http://www.irs.gov/pub/irs-pdf/p590.pdf

sscritic
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by sscritic » Tue Apr 15, 2014 9:39 am

dbltrbl wrote:You must be under 70.5 years age to contribute in a traditional IRA. However, no age limit for ROTH IRA as long as other criterion satisfied. i.e. earned income.
Not true. Read the IRS again. If you turn 70.5 on December 31, you will be under 70.5 for 364 days (365 in a leap year) and can not make a contribution to a traditional IRA on any of those days. Now if you had said you must be under 70.5 on December 31, I would have agreed with you.

Actually, we may both be wrong. You turn 70.5 on February 2. Can you contribute on April 2 to a traditional IRA for the previous year? I suspect you can, the IRS statement I quoted notwithstanding.

Pub 590 has the answer in a more precise statement:
Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70 1/2.

sscritic
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by sscritic » Tue Apr 15, 2014 9:43 am

dickenjb wrote:
dbltrbl wrote:You must be under 70.5 years age to contribute in a traditional IRA. However, no age limit for ROTH IRA as long as other criterion satisfied. i.e. earned income.
Actually you don't even need earned income, just compensation.
i.e., e.g., it's all the same (except it's not).

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abuss368
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by abuss368 » Tue Apr 15, 2014 10:08 am

My understanding is not to a Traditional IRA as RMD (i.e. Required Minimum Distributions) must begin.

A contribution to a Roth IRA is allowable if you have earned income.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

sscritic
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by sscritic » Tue Apr 15, 2014 10:17 am

Isn't anyone going to help the OP out on the real question?
401K/SEP-IRA
We have beaten the traditional IRA to death; it's time to move on (me, to my current soap).

DSInvestor
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by DSInvestor » Tue Apr 15, 2014 10:29 am

sscritic wrote:Isn't anyone going to help the OP out on the real question?
401K/SEP-IRA
We have beaten the traditional IRA to death; it's time to move on (me, to my current soap).
Alan S posted something about 401k/SEP/SIMPLE in this fairmark thread:

http://fairmark.com/forum/read.php?2,57460
Yes, a qualified retirement plan cannot restrict contributions due to age. Therefore, the 5% owner can be making contributions while also complying with RMD requirements each year.

The same is true of SEP and SIMPLE IRA accounts.
Wiki

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abuss368
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by abuss368 » Tue Apr 15, 2014 10:57 am

My understanding is an employer retirement plan must follow the plan document. It is difficult to answer retirement plan questions as we do not have the correct documentation and every plan is unique.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

Ron
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by Ron » Tue Apr 15, 2014 2:02 pm

dickenjb wrote:(<snip) non taxable combat pay (snip >...)
Actually, my total pay was non taxable when I served in Nam in the late 60's, at age 20.

I can't see anybody at age 70.5 in the same situation just so they could contribute to an IRA :mrgreen: :oops: ...

- Ron

mah001
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by mah001 » Tue Apr 15, 2014 2:30 pm

TIRA's authority for deduction is section 219, which states you're done contributing in the year you reach 70 1/2. But SEP and SIMPLE's deduction is under section 404, which doesn't say anything about having to exclude old people. In fact, SEP and SIMPLE must cover everyone eligible, unless the employee opts out of SIMPLE elective deferral. Can also look at regulations, probably proposed years ago but nonetheless worth more than citing a IRS Publication, under 1.408; it may have an example bearing on older employees.

sscritic
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by sscritic » Tue Apr 15, 2014 4:15 pm

mah001 wrote:TIRA's authority for deduction is section 219, which states you're done contributing in the year you reach 70 1/2. But SEP and SIMPLE's deduction is under section 404, which doesn't say anything about having to exclude old people. In fact, SEP and SIMPLE must cover everyone eligible, unless the employee opts out of SIMPLE elective deferral. Can also look at regulations, probably proposed years ago but nonetheless worth more than citing a IRS Publication, under 1.408; it may have an example bearing on older employees.
That's almost it. 219 defines what is deductible, but that doesn't stop you from making a nondeductible contribution; its 408 itself that does that.
(1) Except in the case of a rollover contribution described in subsection (d)(3) in [1] section 402 (c), 403 (a)(4), 403 (b)(8), or 457 (e)(16), no contribution will be accepted unless it is in cash, and contributions will not be accepted for the taxable year on behalf of any individual in excess of the amount in effect for such taxable year under section 219 (b)(1)(A).
So even if you want to make a nondeductible contribution, you can't contribute more than the amount that anyone would have been able to deduct if they wanted to make a deductible contribution. That's where 219(b)(1)(A) comes in (really 219(d)(1))
No deduction shall be allowed under this section with respect to any qualified retirement contribution for the benefit of an individual if such individual has attained age 70 1/2 before the close of such individual’s taxable year for which the contribution was made.
219(b)(1)(A) says you can't deduct more than the deductible amount, which is age limited by 219(d)(1). So for old folks, that amount is zero, and 408 says that is your limit for contributions.

Norsky19
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by Norsky19 » Sat Jan 12, 2019 7:07 am

Maybe a dumb question....or rather a dumb person asking a question :wink: : If you are retired and took lets say 100,000 out of your 401k or IRA, and at the end of the year you ended up with leftover money, can you take said money and reinvest it in a Roth IRA? Is your retirement considered "earned" or is the fact that your are not employed a deal breaker? Assuming one paid their taxes for the calendar year?

Spirit Rider
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by Spirit Rider » Sat Jan 12, 2019 10:46 am

You must have "compensation" to make IRA contributions.

This is things like wages, commission, self-employment, etc...

See "What is compensation?" in IRS Publication 590-A

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Earl Lemongrab
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by Earl Lemongrab » Sat Jan 12, 2019 3:28 pm

Yeah, I can't even make contributions out of my pension payments, let alone dividends or other sources of income.

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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by montanagirl » Sat Jan 12, 2019 3:55 pm

dickenjb wrote:
Tue Apr 15, 2014 9:38 am
dbltrbl wrote:You must be under 70.5 years age to contribute in a traditional IRA. However, no age limit for ROTH IRA as long as other criterion satisfied. i.e. earned income.
Actually you don't even need earned income, just compensation. That includes W-2 income, self employment income

http://www.irs.gov/pub/irs-pdf/p590.pdf
That IS earned income.

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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by Alan S. » Sat Jan 12, 2019 6:28 pm

Norsky19 wrote:
Sat Jan 12, 2019 7:07 am
Maybe a dumb question....or rather a dumb person asking a question :wink: : If you are retired and took lets say 100,000 out of your 401k or IRA, and at the end of the year you ended up with leftover money, can you take said money and reinvest it in a Roth IRA? Is your retirement considered "earned" or is the fact that your are not employed a deal breaker? Assuming one paid their taxes for the calendar year?
If you ever do this again, take several small distributions as you need them, not a huge lump sum that may require either a rollover to put some back or a long time to spend all the money. With small distributions as you need them, you will not need to roll money back and the 60 day deadline will be immaterial.

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celia
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Re: IRA Contributions AFTER 70 1/2 years of age??

Post by celia » Sat Jan 12, 2019 7:00 pm

Norsky19 wrote:
Sat Jan 12, 2019 7:07 am
Maybe a dumb question....or rather a dumb person asking a question :wink: : If you are retired and took lets say 100,000 out of your 401k or IRA, and at the end of the year you ended up with leftover money, can you take said money and reinvest it in a Roth IRA? Is your retirement considered "earned" or is the fact that your are not employed a deal breaker? Assuming one paid their taxes for the calendar year?
If you have reached the year you turn 70.5 or later, you first have to take your RMD. After that, you can convert 100,000 and put it in a Roth. If you plan to pull out that much out of tax-deferred anyway, the Roth is a good idea since you will pay the same taxes whether you put the withdrawal in taxable or in Roth.

Then you can pull anything you want out of the Roth. If you are over 59.5 and a Roth has been open at least 5 years, all Roth withdrawals will be tax-free. If you are under 59.5, you can only withdraw the Roth contributions or conversions without owing tax. (You will need to track how much in Roth contributions or conversions are in your Roths and how much of it you have already withdrawn--until you are 59.5 and the Roth is "age 5". :happy )
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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