Often Overlooked Opportunities to Save in a Roth IRA

I’m retired, but my wife still works part-time. Can I contribute to a Roth IRA? And can I still make a contribution for 2013?

You usually need earned income to contribute to an IRA. But because your wife still works, she can contribute to a spousal IRA on your behalf. You have until April 15, 2014, to contribute to an IRA for 2013 if you or your spouse had earned income in 2013.

The total combined contributions can’t exceed the amount of income your wife earned for the year – she had to earn at least $11,000 in 2013 to contribute the maximum $5,500 to both of your accounts (plus, each spouse who was 50 or older in 2013 can make a catch-up contribution of an extra $1,000 if there is enough earned income). You must be under age 70½ to contribute to a traditional IRA, but there’s no maximum age for Roth IRA contributions.

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To qualify to make Roth IRA contributions, the modified adjusted gross income on a joint federal tax return must have been less than $188,000 in 2013 (or $127,000 for single filers). The contribution amount starts to phase out if the adjusted gross income for the year was $178,000 or more if married filing jointly, or $112,000 or more for singles. The income limits increased slightly for 2014 contributions.

The same rules apply for any situation in which one spouse is working and the other is not, whether the nonworking spouse is staying home with the children, unemployed, a student or not working for any other reason.

Here are some frequently overlooked opportunities to contribute to a Roth. A Roth IRA is a great way to build up a tax-free stash of savings for retirement, and you can withdraw the contributions tax- and penalty-free at any age.

IRAs for kids.There’s no minimum age to own a Roth IRA, either. If a kid has earned income from a job – whether it’s lawn mowing, babysitting or dog walking – he or she can contribute to a Roth IRA. The size of the contribution can’t be more than his or her earned income for the year (with a $5,500 maximum for 2013). You can even give kids the money to contribute if they use their earnings for something else. Some brokerage firms and fund companies make it easier than others for minors to sign up for IRAs. See Setting Up a Roth IRA for a Teenager for more information.

Recent retirees.Even if you aren’t working now, you can still contribute to an IRA as long as you earned some income during the year (investments and pensions don’t count). If you worked at the beginning of 2013 but stopped by summer, for example, you can still contribute to an IRA for the year. And if your income was too high for a Roth while you were working, it may fall below the cut-off after you retire; the limits are based on your modified adjusted gross income for the full year.

Freelancers. If you work for yourself – or even have a little freelance income on the side – you have until April 15, 2014, to contribute to a simplified employee pension or an IRA or both. You can max out your IRA as long as you earned more than $5,500 in 2013. See Best Ways for the Self-Employed to Save for Retirement.

For more information about qualifying to make Roth IRA contributions, see IRS Publication 590, Individual Retirement Arrangements.