Do You Qualify?
If you're interested in starting an IRA, the first thing you need to find out is if you can.
To have any kind of IRA, you must have income from a job, self-employment or alimony. Investment income doesn't count, nor does income from pensions or annuities.
You can put up to $5,500 a year into your IRA in 2015. Taxpayers age 50 and older have even higher limits, in an effort to help procrastinators catch up on retirement. If you've hit the big 5-0, you can set aside an extra $1,000.
The government is serious about the annual limit. Excess contributions are hit with a 6% penalty tax every year until the extra money is removed from the account.
There is an important exception to the rule that you must have compensation to have an IRA. If you have a job but your spouse does not, you can contribute up to $5,500 of your income to a spousal IRA for him or her.
If you open a deductible IRA and are permitted to deduct contributions to your own account, you may write off deposits to the spousal IRA, too. (See What's Your Deduction?)
You're never too young ...
There is no minimum age for IRA participation. If your 10-year-old has compensation -- from a paper route, say, or from working in a family business -- he or she can stash up that pay up to the limits in an IRA.
...But you can be too old
Although you're never too young to have an IRA, the law forbids contributions to deductible IRAs starting with the year you reach age 70½.
There is no age limit for deposits to Roth IRAs.
Income test for Roth IRAs
Although no one gets to deduct contributions to Roth IRAs, there is an income test to determine whether you can use this tax shelter at all.
The right to stash retirement cash in a Roth disappears as AGI rises between $183,000 and $193,000 on a joint return and between $116,000 and $131,000 on the return of a single person, whether filing as an individual, a head of household or a surviving spouse. The same limit applies to spousal contributions. And, yes, catch-up contribution amounts are phased out, too.
If your AGI on a joint return is $188,000, for example, that's halfway through the phaseout zone, so your maximum contribution would be cut in half: to $2,750. If you're contributing for a spouse, too, your combined contributions would be limited to $5,500. And those 50 and older who can make catch-up contributions would be limited to $3,250.
When AGI passes the top of the phaseout zone, you may not contribute to a Roth at all. Note that the Roth phaseout zones apply regardless of whether you are covered by a retirement plan at work.
Married taxpayers who file separate returns may not contribute to Roth IRAs, regardless of their income.