Understanding IRA Age Limitations
As of 2020, the maximum age limit to be able to contribute to a traditional IRA was 70 1/2.
However, with the establishment of the SECURE Act, the contribution has no maximum age limitations beyond Jan 2020.
You can contribute if you have enough taxable compensation to support the contribution amount. This applies to both traditional and Roth IRAs.
Contribution Limits for IRAs
The 2023 contribution limit is $6,500 for both traditional and Roth IRAs. This is an increase from the 2022 limit of $6,000.
An additional $1,000 in catch-up contributions can be contributed by Americans aged fifty or older. Those close to retirement can set aside a bit more since the IRS imposes this.
For 2022, employers can contribute to Simplified Employee Pension (SEP) IRAs either 25% of an employee's compensation or $61,000, whichever is lesser
For 2023, employers can contribute 25% of an employee's salary or $66,000, whichever is lower.
The 2022 contribution limit for Savings Incentive Match Plan for Employees (SIMPLE) IRAs is $14,000 for employees under the age of 50 and for employees above 50 is $17,000. For 2022, the limit for a SIMPLE IRA is $15,500 and $19,000, respectively.
Age Limits for IRA Contributions
Although there are no age limits for IRA contributions, there are still a few considerations to make for each of these accounts.
Traditional IRAs
Contributing to a traditional IRA is now applicable at any age. Previously, contributions at age 70 1/2 have been stopped by the previous laws.
At age 73, the required minimum distribution (RMD) rules still apply but depends on where you were born
Roth IRAs
There is also no age limit for Roth IRA contributions. You can continue to make contributions regularly as long as you or your spouse earns income.
Additionally, no RMDs are applied with Roth accounts, but Roth IRA beneficiaries must take RMDs to avoid penalties.
SEP IRAs
No age limit is present in Simplified Employee Pension (SEP) IRAs. No matter how old you are, employers can contribute to your plan.
However, at age 73, you have to start taking RMDs depending on the year you were born.
SIMPLE IRAs
This type of IRA has no age limit either. Regardless of age, employers must continue making matching or non-elective contributions.
However, at age 73, you still need to take RMDs depending on your birthday.
An Exception to IRA Limits
There are exemptions from the rules for IRA contributions. Here are below:
Age
Contributions are no longer restricted by age.
Starting by the year 2020, anyone with an earned income can make contributions to either of the IRA types - traditional or Roth IRAs.
Non-working Spouses
Spouses who are non-working and without income may contribute to an IRA.
You can open up an IRA in your name and make contributions through a spousal IRA if you don't have taxable compensation.
However, file a joint return with a spouse who earns income. For both spouses, the combined IRA contributions limit is less than $13,000 per year of the total amount earned this year.
The federal limit increases to $14,000 if one of you is 50 or older, and it is $15,000 annually if both of you are.
Bottom Line
The contribution limit for IRAs has not changed in recent years.
The age limit to make contributions was previously 70 ½, but it is now removed entirely.
Depending on the type of IRA you have, there are still a few things to consider, but otherwise, anyone at any age can contribute.
FAQs
1. How much can I contribute to my IRA?
The contribution limit is $6000 for 2022. Then, you can contribute up to $6,500 to your IRA for 2023. If you're 50 or older, you can contribute an additional $1000 in catch-up contributions.
2. What happens if you contribute too much to an IRA?
If you contribute more than the limit, you'll be subject to a six percent excise tax on the excess contributions. You can prevent this tax by withdrawing the excess contributions before your tax return is due. You may also be able to avoid the excise tax if you file an amended return.
3. Can I withdraw money from my IRA before I'm 59 ½?
You can withdraw money from your IRA before you're 59 ½, but you'll be subject to a ten percent early withdrawal penalty. There are a few exceptions to the early-withdrawal penalty, such as using the money to pay for qualified higher education or certain medical expenses.
4. When do I have to start taking distributions from my IRA?
You must take distributions from your IRA when you reach age 73. However, there is no age limit for Roth IRAs, and you're not required to take distributions from a Roth IRA.
5. How much will I need to pay in taxes on my IRA distributions?
The amount of taxes you'll pay on your IRA distributions depends on your IRA type. Traditional IRAs are taxed as ordinary income. On the other hand, Roth IRAs are not taxed. SEP IRAs and SIMPLE IRAs are also not taxed.
