Can you still contribute to an IRA in your 70s?

Question: Clyde in Oxford: I just turned 71 and work part time so I have some extra “fun money.” Even though I’m older than 70 ½, can I still continue to contribute to an IRA? And will I get a tax break?

A: The answer to the first part of your question is ‘yes’ thanks to the 2019 SECURE Act. Prior to this law’s passage, anyone age 70 ½ or older could not contribute to a traditional IRA (since this was the age Required Minimum Distributions, or RMDs, kicked-in). However, the SECURE Act not only bumped up the start age of RMDs to 72, it also now allows anyone who is 72 or older to continue contributing to an IRA – as long as they have ‘earned income.’

And this change makes sense on a practical level. According to Morningstar, 20% of folks age 65 or older were working (or looking for work) in 2019. This is nearly double the amount back in 1985. So, as people are working longer, it’s only fair they’re allowed more flexibility with their retirement accounts.

In 2021, you can contribute up to $7,000 to an IRA ($6,000 for anyone younger than 50) as long as you have at least $7,000 of earned income. (If your income is less than this, you can contribute up to however much you’ve earned.)

As for if you’ll get a tax break, that depends on whether or not you currently participate in a qualified retirement account (like a 401(k)). If you don’t participate, you can deduct your full IRA contribution amount. If you do, your Modified Adjusted Gross Income (MAGI) needs to be $66,000 or less to deduct your full contribution (assuming you’re a single tax filer). Deductions then start phasing out and are not deductible at all once an individual’s MAGI hits $76,000.

Here’s the Simply Money Point: The rules have changed for older workers, so feel free to take advantage! But also keep in mind that there could be other types of accounts better suited for your needs – such as taxable brokerage accounts or even a Roth IRA.