I received some pay through a W-2 for benefits that were owed to me after my company went bankrupt in 2014. I received the money in 2020 thru another company that took over settlement of my former company. When I filled out all my information in TurboTax the software gives me opportunity to open a traditional IRA and save over $800 in taxes owed. I turned 70 in February and I am under 70 1/2; can I legally open a IRA and do this?
Yes. The SECURE Act signed into law in 2019 removed the age limit for Traditional IRA contribution starting in 2020, so you can contribute at any age now, provided you have sufficient taxable compensation to do so.
I assume you mean income earned thru a W-2 or a 1099. What is sufficient?
@wevans3 wrote:
I assume you mean income earned thru a W-2 or a 1099. What is sufficient?
As much as the contribution.
The maximum IRA contributions for 2020 and 2021 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deductible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355
Thanks. I thought the rules had changed and you confirmed it.
According to IRS.gov, for 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.