There are some stark differences between Roth IRAs, Traditional IRA, and other retirement plans, like workplace 401(k)s. Some of those differences come about through contribution limits, ages where you must draw RMDs (Required Minimum Distributions), and the age you are no longer allowed to make contributions to your account.
Ronald asks, “Mike, hope you’re doing well. I had a quick question about my Traditional IRA and what age I can no longer make contributions to it and how much I can currently contribute to it. I’m trying to make up for lost time because I just recently got a good job and I never really made contributions before.
I’m currently 53 years old and I plan on retiring between ages 62-65. Thanks for any answers you can give me.”
Ronald, thank you for writing. Some background for anyone wondering; a Traditional IRA allows pre-tax contributions (you get a tax deduction for contributing to one).
Because of this, Congress and the IRS put limitations on how much you can contribute, how much can be deducted from your other income for tax purposes, and other restrictions.
For starters, your Traditional IRA has a contribution limit of $6,000 for tax years 2019 and 2020. However, anyone age 50 and older is allowed a “catch-up” contribution of $1,000, meaning you have a contribution limit allowed of $7,000.
It should be noted that Roth IRAs have the same contribution limits as Traditional IRAs, however they grow tax-free instead of the contributions being deductible.
Make sure you sit down with an advisor, Ronald, and discuss your retirement options. You should look at how much you need to save into your Traditional IRA, 401(k), and any other non-qualified accounts to reach your retirement goals.
You need to see tax consequences for different scenarios, especially if you plan on starting to draw Social Security at age 62 as opposed to putting it off longer.
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This article is not intended to be financial, legal, or tax advice. For help regarding your specific situation, please consult a local advisor.