Qualifying for an IRA beyond the age of 70
Dear Mr. Priest: I am 73 years old and sit on the board of directors for a small company. It doesn’t pay me much, but it usually amounts to several thousand dollars per year. I’m not working other than that, although I do collect some pension benefits from my previous employer. I have a fair amount of investments and don’t need the income from the director’s fees. Can I use this income from the director’s fees to qualify me for an IRA?Perry
Copper MountainDear Perry: Most individuals with earned income can make some type of IRA contributions provided they qualify. Earned income includes wages, salaries, fees, tips and commissions.
Your director’s fees would actually count as earned income. Income that would not count includes things like rental or investment income, interest, retirement benefits and disability income. Although you cannot contribute to a Traditional IRA beyond the age of 70.5, you may qualify to contribute to a Roth IRA assuming your Adjusted Gross Income (AGI) from all sources is less than certain limitations. For unmarried individuals the contribution limits phase out at an AGI range of $95,000 to $110,000, for married individuals filing jointly the phase out ranges from $150,000 to $160,000, and if you are married filing separately your phase out ranges from $0 to $10,000.
Unfortunately the IRS doesn’t look too kindly on folks that are married filing separately when it comes to IRA contributions. If your AGI is within these allowable ranges, you will be able to contribute up to 100 percent of your AGI (including director’s fees) or $3,500 whichever is less; $3,000 for the standard Roth IRA contribution plus a $500 catch-up provision since you are over the age of 50. Therefore, yes you can use your director’s fees to help you qualify for contributions to a Roth IRA. Happy planning!Bob Priest, MBA, CFP, is an Independent Certified Financial Planner. He can be reached at (970) 513-7077 or visit his Web site at http://www.BobPriestFinancial.com. All opinions herein are that of the author and not that of the Summit Daily News or its staff. Priest is a Registered Principal offering securities through but not affiliated with SunAmerica Securities Inc. (SAS), a registered broker-dealer and member NASD/SIPC. Submit your financial questions to Bob@FinancialCompanies.com.
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