Can I Make Contributions to a Traditional IRA if I Am Over Age 70?

by Tom Gresham

    A traditional IRA is a retirement investment account that allows you to invest money to try to build wealth for retirement. You must be younger than 70 1/2 years old at the end of the current tax year to contribute to a traditional IRA. Therefore, you only have a short period of time after you turn 70 when you can still contribute to a traditional IRA.

    As an investor with a traditional IRA account, you receive a tax deduction on your contributions, and you are not taxed on earnings until you withdraw money from the account. This tax advantage provides an incentive to contribute to a traditional IRA even after your retirement. The 70 1/2 age limit reduces the potential of that benefit, preventing account holders from making tax-free contributions long after they have retired. A traditional IRA does not have a minimum age requirement.

    In addition to age requirements, you (or your spouse, if you are married and filing jointly) must have taxable compensation to qualify to make contributions to a traditional IRA account, according to the Internal Revenue Service. Types of compensation that qualify include employment income, such as wages or bonuses, and net income from self-employment. It also includes taxable alimony. However, not all income qualifies. For instance, income from rental properties or stock dividends do not qualify you to make contributions to a traditional IRA. The income must be earned in the tax year that you contribute to a traditional IRA.

    If you are eligible to contribute to a traditional IRA account, you still must keep contributions to the annual limit established by the IRS. The IRS can adjust the maximum contribution from year to year. In 2012, you are limited to contributing no more than your taxable compensation that year or $5,000 -- whichever amount was smaller. If you are 50 years old or older, your maximum contribution rises to $6,000. The maximum contribution level will jump to $5,500 in 2013 or $6,500 if you are older than 50 years old.

    The age of 70 1/2 does not just serve as a milestone for contributions to a traditional IRA account. It also marks the age that you are required to begin taking distributions from a traditional IRA account. On April 1 of the year after you reach that age, you must begin to take regular minimum distributions from your traditional IRA or risk an excise tax charge of 50 percent on the minimum amount not withdrawn. Minimum distribution amounts are determined by dividing the account balance by the account owner's life expectancy based on IRS calculations.

    About the Author

    Tom Gresham is a freelance writer and public relations specialist who has been writing professionally since 1999. His articles have appeared in "The Washington Post," "Virginia Magazine," "Vermont Magazine," "Adirondack Life" and the "Southern Arts Journal," among other publications. He graduated from the University of Virginia.

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