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By Theresa Fry, Senior Vice President and Manager, IRA and Retirement Plans

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Part 1 of a 2-part series.

Retirement means different things to different people.  Your age when you retire can be impacted by many factors such as your health, your love of the work you do, your need for financial stability, or even your desire to stay active and part of something bigger than yourself.  If you have decided to continue working into your 70’s or beyond, it’s important to understand what that decision means when it comes to your retirement savings accounts.  In our first article in this two-part series, we will address retirement account contributions after age 70 ½.

Traditional IRA Contribution Must Stop, but Roth, SEP IRA, SIMPLE IRA and Retirement Plan Contributions May Continue until Retirement.

  • Traditional IRAs. Traditional IRA contributions must stop when you reach age 70 ½ whether you are still working or not. The last contribution you can make to a traditional IRA is for the tax year before the year in which you turn age 70 ½.  For example:  If your 70th birthday is in April 2018, you’ll turn age 70½ (6 months after your 70th birthday) in October 2018.  That means that you cannot make a 2018 IRA contribution, but you can make a contribution for 2017, even if that contribution is made in April 2018.  If you turn age 70 in August 2018, you’ll be 70 ½ in February 2019.  That means you can make a traditional IRA contribution for 2018 if you are still working and earning income, but not for 2019.
  • Roth IRAs. Roth IRA contributions are not restricted by your age, but high wage earners may not be eligible to contribute at all. To be eligible to make a Roth IRA contribution for 2017, you need wages or earned income and your modified Adjusted Gross Income (AGI) cannot exceed $133,000 (for single tax filers) or $196,000 (for joint tax filers).
  • SEPs, SIMPLEs, 401(k)s, 403(b)s, and Other Qualified Retirement Plans. Participation in your employer’s retirement plan is limited only by the eligibility requirements of the plan.   Although some may have a minimum age of 18 or 21 to participate, there is no maximum age that limits your participation.  If you are currently a participant in a plan and you are still an active employee, you can continue making salary deferral contributions or receiving employer contributions based on your compensation.

In our next article, we will discuss how required minimum distributions are impacted by continuing to work after age 70 ½.

This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.

December 8, 2017 |