Is There an Age Limit for IRA Contributions?
Age may no longer be the primary factor for IRA contributions. Understand the current guidelines and what now determines your ability to save for retirement.
Recent changes to retirement laws have left many people wondering about the rules for funding an Individual Retirement Arrangement (IRA), particularly later in life. The question of whether an age limit exists for making contributions is a common point of confusion for those approaching or already in their retirement years. As regulations have shifted, understanding your ability to continue saving is part of managing your financial future.
The Current Rule on IRA Contribution Age
There is no longer an age limit for contributing to a Traditional IRA. This change resulted from the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became law in late 2019. Before this law, individuals were prohibited from contributing to a Traditional IRA for the year they turned age 70½ and all subsequent years. This restriction was eliminated starting with the 2020 tax year, allowing people of any age to contribute if they meet other requirements.
This update brought the rules for Traditional IRAs in line with those for Roth IRAs, which have never had an age restriction on contributions. The primary difference between the two now revolves around tax treatment and income limitations, not the contributor’s age. This alignment simplifies retirement planning, as age alone does not prevent you from adding to your tax-advantaged savings.
The Earned Income Requirement
While the age barrier has been removed, the requirement to have earned income remains. To contribute to any IRA, you or your spouse must have compensation, which the IRS defines as money earned from working. This includes wages, salaries, tips, commissions, bonuses, and net income from self-employment.
Many income sources common in retirement do not count as earned income. Social Security benefits, pension or annuity payments, and income from investments like dividends or interest do not qualify as compensation for IRA contributions. Money from rental properties or capital gains also cannot be used to fund an IRA, which means a retiree without active employment income cannot make new contributions.
An exception exists for married couples who file a joint tax return. Known as a spousal IRA, this provision allows a working spouse to make contributions to an IRA for a non-working or low-income spouse. The couple’s combined earned income must be enough to cover the contributions for both spouses, allowing a household to continue saving even if one spouse is not in the workforce.
Annual Contribution Limits
The Internal Revenue Service sets annual limits on the total amount you can contribute to all of your IRAs, including both Traditional and Roth accounts. For the 2024 and 2025 tax years, the maximum contribution is $7,000. Your contributions cannot exceed this annual maximum or your total earned income for the year, whichever is less.
To help individuals bolster their savings, the tax code allows for catch-up contributions. If you are age 50 or over, you can contribute an additional amount on top of the standard limit. For 2024 and 2025, this catch-up amount is $1,000, bringing the total potential contribution for those age 50 and older to $8,000 per year.