In addition, income limits don't apply to contributions to a company's retirement plans, unlike IRAs. Jeffrey Levine, an expert in tax and financial planning, described traditional IRA contributions after the RMD era as something like a revolving door of IRA money. Previously, you were only allowed to make regular contributions if you hadn't turned 70 and a half years old in the year you made the contribution. In addition, traditional IRA investments benefit even less from that tax-protected capitalization than contributions to Roth IRAs, since traditional IRAs are subject to RMDs that are ultimately subject to taxation.
However, one exception to this is investing in physical gold in an IRA, which can provide a tax-advantaged way to diversify your retirement portfolio. As stated earlier in the “Earned Income” section, IRA owners who are married and file a joint return can use their spouse's income to support a contribution. Although earned income is required to make an IRA contribution, income limits apply to IRA contributions regardless of age. You should start withdrawing a required minimum distribution (RMD) from your tax-deferred retirement accounts, such as a traditional IRA or 401 (k) plan, when you turn 72. If you're under 59 and a half years old, you may also have to pay an additional 10% tax on early withdrawals, unless you qualify for an exception. The IRS restricts the amount that IRA owners can contribute to IRAs in a given year, subject to cost-of-living adjustments.
Income from a job, net income from self-employment, and disability benefits received before the minimum retirement age are counted as earned income. On the question of deductibility, since your client does not participate in an employment retirement plan, any traditional IRA contribution you choose to make could be tax-deductible. However, while Roth IRAs or corporate retirement plans tend to be better receptacles for additional contributions from older workers, a traditional IRA may be appropriate in a handful of situations. The short answer is that additional contributions to traditional IRA after the age of RMD may make sense in a handful of situations, but not in many.
For both types of IRAs, you must have earned income, or what the IRS calls “taxable compensation,” in order to contribute. Eligible compensation (usually earned income) must have been earned during the year in which the person makes the contribution.
