The timing of your IRA contributions can determine how much they grow over time and how much you'll have to use in retirement. So, it's important to learn how early and late in life you can start socking money into your traditional and Roth IRA accounts.
Prior to 2020, the maximum age limit to contribute to a traditional IRA was 70 1/2. In 2020 and beyond, as a result of the SECURE Act, there is no maximum age at which you can make a contribution to a traditional or Roth IRA.
- There's no maximum age limit to contribute to traditional and Roth IRAs.
- There’s also no minimum age, but you do need to have taxable compensation.
- There’s no minimum or maximum age to roll over an account to an IRA or make an IRA transfer.
No Maximum Age Limit for IRA Contributions
- Traditional IRA: For a traditional IRA, as of January 1, 2020, there is no maximum age at which you can make a contribution as long as you have sufficient taxable compensation to support the contribution amount.
- Roth IRA: There is no upper age limit to make a contribution to a Roth IRA, either before or after 2020. You must have taxable compensation, though.
If neither you nor your spouse has taxable compensation, you cannot contribute to an IRA for tax year 2020 and beyond, regardless of age.
No IRA Age Limit on IRA Rollovers or Transfers
Don’t confuse IRA contributions with IRA rollovers or transfers. Some retirees mistakenly believe that they cannot open an IRA account and then roll their lump-sum pension distribution or 401(k) plan to an IRA because they exceeded the IRA age limit under the old rules. That is incorrect.
An IRA contribution is not the same thing as an IRA rollover or IRA transfer. When you move money from a company-sponsored retirement plan, such as a 401(k) or 403(b), directly to an IRA, that is called a "rollover." You can do that at any age. When you transfer money from one IRA to another IRA it is called an "IRA transfer," and you can also do that at any age. In contrast, a "contribution" is new money that was not previously in a tax-deferred account and that you are now putting into an IRA.
Do not confuse Roth conversions with contributions, either. There is no upper age limit on your ability to convert traditional IRA assets to Roth IRA assets. You can do that at any age; however, conversions can't be done on amounts that must be distributed from your traditional IRA for a particular year. That includes the calendar year in which you turn 72 (70 1/2 if you reached that age prior to January 1, 2020) under ordinary required minimum distribution rules.
Spousal IRA Contributions
Many people are not aware that they can make a spousal contribution to an IRA on behalf of a non-working spouse as long as one spouse has sufficient taxable compensation.
For example, suppose you don't have the compensation to contribute to an IRA, but your spouse does. You can still make a spousal IRA contribution to a traditional IRA. Spousal IRA contributions to Roth IRAs are also allowed.
Minimum Age Limit for IRA Contributions
There is no minimum age limit to make any type of IRA contribution. However, to be eligible, you must have taxable compensation in an amount that equals or exceeds the amount of your IRA contribution. Taxable compensation is income you've worked for, including salaries, wages, and self-employment income. Parents can also establish Roth IRAs on behalf of minor children, provided that what the minors earn meets the IRS definition of taxable compensation.
Other Age-Related IRA Rules
There are two additional age-related IRA rules that all IRA account holders should know:
1. Age 59 1/2: This is the age at which you can begin to access your IRA money and take withdrawals, and the IRA early-withdrawal penalty tax will not apply. However, ordinary income taxes will still apply. This rule applies primarily to traditional IRAs. Roth IRAs work a little differently. With those accounts, you can withdraw your contributions any time without an age restriction, but if investment gains or converted amounts are withdrawn, age limits or time limits are applied to determine what portion will be taxed.
2. Age 72 (or age 70 1/2 if you reached that age prior to January 1, 2020): That is the age at which you must begin to take withdrawals from traditional IRAs and most qualified retirement plan money (such as 401(k)s, 403(b)s, and SEPs). These withdrawals are called "required minimum distributions" (RMDs). Required minimum distribution rules do not apply to Roth IRAs while you are alive. However, they do apply to designated Roth accounts offered in a 401k plan, and they also apply to Roth IRA accounts that are inherited.
Frequently Asked Questions (FAQs)
Is there a limit to how much I can withdraw from my IRA after I reach retirement age?
There's a 10% penalty tax designed to prevent early withdrawals, and if you qualify to avoid those penalties, then there's no limit to how much you can withdraw and no consequences for doing so. There are only two factors to be aware of as you consider this option. First, if you withdraw all of your funds early on in retirement, then you won't have any savings for the rest of your life. Second, if you're withdrawing from a traditional IRA, you will owe income taxes, so consider those costs as you calculate withdrawals.
How does age affect maximum contributions?
Those who are at least 50 years old can make extra contributions as they near retirement. This extra "catch-up" contribution is $1,000 above the standard limit. Therefore, in 2021, the maximum IRA contribution for someone 50 or older is $7,000.
At what age can you open an IRA?
You can open an IRA at any age, but you need to earn income to contribute to it. A 16-year-old with a part-time job can open an IRA and start contributing, but a 20-year-old full-time student without any income cannot make any IRA contributions. Keep in mind that minors can only open custodial IRA accounts, so they'll need the help of an adult to use an IRA until they reach the minimum legal investing age (usually 18, but it depends on state law).