age limit for traditional ira contribution
1 Contribution rates phase out beginning at a MAGI above $116,001, and end at $131,000 (up from $114,000, and $129,000, respectively in 2014). 2  Married Filing Jointly can make maximum Roth IRA contributions for an income of $183,000 or less. ROTH IRA. There are no penalties on withdrawals of Roth IRA contributions. But there's a 10% federal penalty tax on withdrawals of earnings. Exceptions to the penalty tax. TRADITIONAL IRA. With a traditional IRA, there's a 10% federal penalty tax on withdrawals of both contributions and earnings. Traditional IRA. If you earn income and are younger than age 70 ½, you may open a traditional IRA. Generally, contributions are tax deductible, and the interest your account earns is not taxable until you begin to make withdrawals. To make new deposits to a traditional IRA, you must be under 70 ½, but you may roll funds from an eligible retirement account into a traditional IRA at any age. Traditional IRA Deductions. Traditional IRA contributions are 100% tax deductible if you make less than the IRS deductibility phase out level (less $61,000 if you are single, or less than $98,000 if you are married filing jointly). According to the IRS, the same tax rules that apply to traditional IRAs apply to SEP IRAs, implying that the SEP contribution age limit is also 70 ½. The employer must continue to make deposits to an employee's SEP fund regardless of how old he is. Roth IRA. If you earn an annual income that falls within the limit for Roth IRAs -- less than $179,000 if you are married and less than $122,000 if you are single in 2012 -- you may open this type of retirement account. The Traditional and Roth IRA contribution limits are $5,500 for those under age 50. Persons age 50 and over can make additional catch up contributions of $1,000, for a total contribution limit of $6,500. You can have both a Roth IRA and a Traditional IRA in the same tax year, but you can’t exceed the contribution limit with your combined contributions to both accounts. Deposits into a traditional IRA, for example, might be tax deductible. The taxes on your earnings are also deferred until you start taking money out. Although contributions to Roth IRAs are not tax write-offs, withdrawals are not taxed. Like the Traditional IRA, the IRS has phase out rules for Roth IRA contributions. Tax filers will be able to contribute the maximum amount to their IRA if they don’t exceed certain income limits. 1  Single, Head of Household, or Married Filing Separately can contribute the maximum if their MAGI is $116,000 or less.
70 ½