You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or company. However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participate in another retirement plan at work. It depends on what type of IRA it is. Just about anyone can contribute to a traditional IRA, as long as you (or your spouse) receive taxable income and are under 70 and a half years old.
However, your contributions are tax-deductible only if you meet certain requirements. For more information on those qualifications, see Who can contribute to a traditional IRA? Anyone with earned income can open and contribute to an IRA, including those who have a 401 (k) account through an employer. The only limitation is on the total contributions to your retirement accounts in a single year. You can contribute to a traditional IRA and a Roth IRA in the same year.
If you qualify for both types, make sure that the amount of your combined contribution does not exceed the annual limit. Although earned income is required to make an IRA contribution, income limits apply to IRA contributions regardless of age. The contribution limits for traditional IRA contributions that you can deduct on your tax return are the strictest; Roth IRA contributions are allowed with a higher income limit. Anyone can make a traditional non-deductible contribution to the IRA, regardless of income or age.
Those contributions could then be converted to Roth for a “clandestine” Roth IRA. However, such a maneuver will entail tax costs in the (probable) scenario where a retiree has significant traditional IRA assets that have not yet been taxed. However, while Roth IRAs or corporate retirement plans tend to be better receptacles for additional contributions from older workers, a traditional IRA may be appropriate in a handful of situations. You can contribute to a Roth IRA as long as you have eligible earned income, no matter how old you are.
But if you can make a contribution to the IRA, should you? Or would it be better if you saved in a taxable account? Both the fact that Americans work longer than they used to, and the fact that the age requirement for making contributions to the traditional IRA was abolished, is a nod to the fact that Americans work longer than before. Depending on the type of IRA you use, an IRA can lower your tax bill when you make contributions or when you withdraw money when you retire. Roth IRAs have no age limits for contributions, and workers can also contribute to their company's retirement plans (such as 401 (k) plans) and delay the RMDs of those accounts, as long as they are still employed and are not the primary owners of the company. If you don't have a retirement plan at work, your traditional IRA contributions are fully deductible.
However, a related provision, which received less attention, allows account owners to continue making contributions to traditional IRAs after age 72, as long as they have earned income. Business owners who set up SEP IRAs for their employees can deduct contributions they make on behalf of employees. There are annual income limits for deducting contributions to traditional IRAs and contributing to Roth IRAs, so there is a limit to the amount of taxes you can avoid investing in an IRA. This means that you contribute to a Roth IRA with the money deducted from taxes and you don't pay taxes on profits or investment withdrawals.
Earned income is a requirement to contribute to a traditional IRA, and your annual contributions to an IRA cannot exceed what you earned that year. If neither you nor your spouse (if any) participate in a work plan, your traditional IRA contribution is always tax-deductible, regardless of your income. .