The Maximum Age for IRA Contributions

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Many holders of Individual Retirement Accounts know about the restrictions on making withdrawals before retirement age. But the federal tax code also includes limits on making IRA contributions well into retirement age. The point is to make sure IRA holders use their account for its intended purpose -- to help fund their retirement. A penalty applies to any contribution you make past the maximum age.


The Internal Revenue Service allows you to open and contribute to a traditional IRA during a given year only if you will not turn 70 years 6 months by the end of the year. In the same vein, you must begin making withdrawals from your IRA no later than age 70 1/2. The IRS views contributions past age 70 1/2 as excess contributions, subject to the same 6 percent tax that applies to contributions that exceed the annual limit. If you contribute $1,000 to your IRA as a 72-year-old, for example, you will owe the IRS $60 in additional taxes.


The IRS established IRAs as tax-advantaged accounts to encourage individuals with income to invest in their retirement. As long as you maintain funds in your IRA, it acts as a tax shelter in which you owe taxes on neither your contributions nor the earnings those contributions generate. The IRS wants to ensure you will use your IRA for its intended purpose -- and that it receives the tax you owe on the funds in the account during your lifetime, according to Kevin McCormally, editorial director of Kiplinger, a publisher of personal finance advice and business forecasts.


You have a bit of flexibility in the rule regarding the maximum age for IRA contributions because if you make a contribution in a given year between Jan. 1 and April 15 -- or whichever day taxes are due -- you can designate that contribution as applying to the previous year. If you will turn 70 1/2 in 2011, for example, you could still make contributions by the due date for taxes in April 2011 by designating the contributions as applying to 2010. Keep in mind that you need taxable compensation to make IRA contributions. If you receive only Social Security or money from a pension, you cannot contribute to an IRA.


If you have a Roth IRA instead of a traditional IRA, an age ceiling for making contributions does not apply. You can make contributions at age 71 and above. The difference is that you do not receive a tax deduction for contributions to a Roth IRA, and thus do not owe taxes on withdrawals. The IRS therefore does not worry about whether you will use a Roth IRA indefinitely as a tax shelter. Along those lines, you do not need to begin taking Roth IRA distributions when you turn 70 1/2.