You can start contributing to traditional, Roth and SIMPLE IRAs at any age. Only SEP IRAs require participants to be at least 21 years old. For each of these accounts, your contributions should not exceed the amount of taxable income you earn that year. There may be other eligibility requirements, but your youth won't stop you from saving money for your future.
In the past, if you were over 70 and a half years old, you would lose the ability to contribute to a traditional IRA. However, under the new law, there are no age restrictions. Nor is there any age restriction for people over 70 years of age to contribute to a 401 (k) plan. A provision of the law also encourages older workers to continue saving for retirement and to get a tax benefit for doing so.
That is, the Security Act now allows people over 70 and a half years old to make tax-deductible contributions to an IRA. If you want to save in your 70s, it would be best to avoid those tax-deductible IRA contributions altogether, Slott said. Keep in mind that those who are 70 and a half years old or older and make contributions to a traditional IRA, a SIMPLE IRA, or an SEP IRA will continue to have to apply for an RMD, even if they are still working. In this case, they make non-deductible contributions to the IRA and then convert those sums into a Roth IRA, Slott said.
The Security Act complicates this strategy for people who want to continue saving on their IRA after 70 and a half years, but who also want to make those charitable distributions with their accounts. In 2022, those adjustments will make a big difference in who can contribute to a Roth IRA and who can deduct their contributions to a traditional IRA from their taxable income. Just as you can only contribute to your IRA until you reach a certain age, most IRAs impose the required minimum distributions (RMDs) once you turn 70.5 or 72, depending on your date of birth. In addition, you should receive the required minimum distributions (RMDs) from your IRA after age 72, according to the IRS life expectancy tables.
That's because older savers who save in an IRA and receive a tax deduction for doing so could find themselves accidentally paying taxes on those charitable distributions, according to recent guidance from the IRS. A Roth IRA might be better than a traditional IRA for people who want to save on taxes in retirement when they expect to earn more later than they do now.