I'm 72 years old and earn some money as a self-employed consultant. Can I contribute to an IRA and, if so, how much?
You can’t contribute to a traditional IRA starting in the year you turn 70½. But you can contribute to a Roth IRA at any age, and the money can grow tax-free in the account indefinitely (you don’t have to take required minimum distributions). To qualify for a Roth, your income in 2016 must be less than $132,000 if you’re single or $194,000 if you’re married and file taxes jointly.
You can contribute up to the amount you earned for the year (your net income from self-employment), with a maximum of $6,500 ($5,500 plus $1,000 for people age 50 and older). If your earnings are well over the $6,500 max, you can simply contribute that amount, but if they are close to or under the maximum, you’ll need to know what is considered compensation and how to calculate your allowed contribution. For that information, see IRS Publication 590, Individual Retirement Arrangements.
Sign up for Kiplinger’s Free E-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.
Or, because you are self-employed, you can contribute to a solo 401(k), says Rande Spiegelman, vice president of financial planning with the Schwab Center for Financial Research. You can deduct your contribution now and defer taxes on the money until it’s withdrawn. But because you’re over age 70½, you must take required minimum distributions from the solo 401(k). Employees usually don’t have to take RMDs from their current employer’s 401(k) if they’re still working at age 70½, but that rule doesn’t apply if you own 5% or more of the company. Because you’re self-employed and own the whole company, you’re stuck taking the RMDs.
For more information about solo 401(k)s, see Retirement Plans for Self-Employed Workers.
-
Stock Market Today: Stocks End Higher in Whipsaw SessionThe main indexes were volatile Thursday with Nvidia earnings in focus.
-
Trump Picks Dr. Oz as Head of Medicare and MedicaidPresident-elect Donald Trump picked Dr. Mehmet Oz to lead the Centers for Medicare and Medicaid Services. Here's what to know about the former TV host.
-
Getting Out of an RMD Penaltyretirement When your brokerage firm miscalculates your required minimum distributions, you have recourse.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
It’s Not Too Late to Boost Retirement Savings for 2018
retirement Some retirement accounts will accept contributions for 2018 up until the April tax deadline.
-
How to Correct a Mistake on Your RMDs from IRAsretirement If you didn't take out the correct required minimum distribution because your brokerage firm made a mistake, the IRS may show some leniency.
-
Making the Most of a Health Savings Account Once You Turn Age 65
Making Your Money Last You’ll face a stiff penalty and taxes if you tap your health savings account for non-medical expenses before the age of 65. After that, the rules change.
-
Reporting Charitable IRA Distributions on Tax Returns Can Be Confusing
IRAs Taxpayers need to be careful when reporting charitable gifts from their IRA on their tax returns, or they may end up overpaying Uncle Sam.
-
Make the Most of the New Military Retirement Plan
retirement The government is offering a new retirement option so that service members who leave the military before qualifying for a pension can still receive some benefits.
-
How Changes in Income Affect Medicare Premiums
Medicare Medicare beneficiaries can see their premiums go up if their income rises, although for some that increase will be only temporary.
