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Age Cut-Off for a Roth IRA

Age Cut-Off for a Roth IRA
If you’re nearing the end of your career, you may be wondering if a Roth IRA is still a wise addition to your portfolio. It is possible to open a Roth IRA later in life and start saving.

Roth IRAs aren’t just for young people, as long as you meet the criteria regarding income, how much you may contribute and when you’re eligible for penalty-free withdrawals. A recent U.S. News & World Report article provided by Beck, Lenox and Stolzer Estate Planning and Elder Law, LLC entitled, “Are You Too Old to Benefit From a Roth IRA?” , explains the benefits and requirements for older workers considering a Roth IRA. Is there an age cut-off for a Roth IRA?

Requirements for a Roth IRA

Once you meet the qualifications, you can add funds to a Roth IRA at any age. In 2024, the contribution limit is $7,000 or $8,000 if you’re 50 or older. The account must be open for at least five years to take penalty-free withdrawals in retirement. If you take funds out early, you could face penalties, and contributions to a Roth IRA may only be made from earned income.

A single person may add funds to a Roth IRA if they earn up to $146,000. After that, the amount you may contribute is phased out until income reaches $161,000, after which you can’t add funds directly to the account. For married couples, the income threshold is less than $230,000.

Roth IRA Tax Benefits

Funds are taxed before they go into a Roth IRA account, giving the advantage of the account the tax-free distributions of contributions and earnings. In addition to the five-year rule, you’ll need to meet these eligibility requirements:

  • The original owner dies, and you inherit the Roth IRA.
  • The owner is at least 59 ½ years old.
  • The owner meets disability requirements.
  • The distribution is used for first-time homeowner expenses of up to $10,000.

Age Considerations

If you’re in your 70s and still working, there are some facts to consider before opening a Roth IRA. The tax-free growth of Roth IRAs works best as the holding period increases. The up-front tax costs may be very high if you’re in your highest income level and a higher tax bracket. This makes a Roth IRA more advantageous for younger contributors. However, if you work part-time, your lower taxable income might make the Roth IRA an excellent way to save.

Passing Funds to Heirs

With traditional IRAs or 401(k)s, Required Minimum Distributions start at a certain age, usually after celebrating your 73rd birthday. However, there are no RMDs for Roth IRAs, and the funds remaining in the account after you die could be passed on tax-free. Beneficiaries may inherit the Roth IRA while allowing it to grow tax-deferred for up to ten years, then take the money without paying taxes.

Opening a Roth IRA later in life should be coordinated with your overall retirement and estate plan to be sure it works in concert with your overall estate plan. When reviewing your estate plan, it’s something to discuss with your estate planning attorney. If you are in need of an estate planning attorney, give us a call or go online to schedule a free phone consultation with one of our attorneys at Beck, Lenox and Stolzer Estate Planning and Elder Law.

Reference: U.S. News & World Report (Dec. 29, 2023) “Are You Too Old to Benefit From a Roth IRA?”

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