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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Spousal accounts
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.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
What DOGE is Doing NowThe Kiplinger Letter As Musk's DOGE pursues its ambitious agenda, uncertainty and legal challenges are mounting — causing frustration for Trump.
-
COVID Hospitalization Rates See an Uptick As Winter Looms — The Kiplinger LetterThe Kiplinger Letter A new Omicron booster is available, but the elderly are still at risk and winter is right around the corner.
-
Will Weight-Loss Drugs Spike Medicare Costs?: The Kiplinger LetterEconomic Forecasts Lawmakers are trying to get weight-loss drugs like Wegovy covered by Medicare. Long-term savings are possible, but it could cost the program $27 billion.
-
Greenland, U.S. Plans to Boost Tourist Economy: Kiplinger Economic ForecastsEconomic Forecasts A U.S. congressional effort could see some Canadian visitors get longer stays, meanwhile, Greenland bids to be the next vacation hotspot.
-
Medicare Drug Price Negotiations Latest: Kiplinger Economic ForecastsEconomic Forecasts Medicare drug price negotiations: Early signs have emerged of how these key talks will be handled.
-
Forces That Affect Your Estate Planretirement From probate and ownership division to the taxing arm of Uncle Sam, here are four things that can influence what happens to your belongings.
-
Tapping Your IRA in Retirementretirement You can cash in your IRA all at once, but doing so could subject you to an enormous tax bill. You'll probably do better tax-wise by taking out as little as necessary each year.
-
Make a Plan for Your Retirement Savingsretirement The first step to effectively using your 401(k) is to assess your retirement needs.
