What are the rules for contributing to an ira if we are over 70 1/2 and still working?

[masm48]

What are the rules if we are over the age of 70 1/2 and one of us (husband) is still working and contributing to a traditional IRA and contributing to another's (wife) Roth IRA?  

Turbo Tax claims that we made an excess contribution for the amount contributed to the traditional IRA.

[Coleen3 · Accepted solution]

Once you reach age 70 1/2, you can no longer contribute to a Traditional IRA. 

• Roth IRA: There is no upper age limit to make a contribution to a Roth IRA. You must have earned income though. So, if neither your or your spouse are working then you cannot contribute to a Roth regardless of age.
• Traditional IRA: For a Traditional IRA, once you reach the year in which you turn age 70 ½ you are no longer eligible to make a Traditional IRA contribution.

Tax on Excess Contributions

• In general, if the excess contributions for a year aren’t withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. The tax can’t be more than 6% of the combined value of all your IRAs as of the end of your tax year.

[dmertz]

Also, make sure that amounts reported in box 12 of his W-2 (if any) are entered only in box 12 of TurboTax's W-2 form, nowhere else in TurboTax.  If your husband is self-employed and made contributions to a SEP plan or SIMPLE IRA established under his business, these are entered in the Business section, not under Deductions & Credits; SEP and SIMPLE IRA contributions are still permitted after age 70½.

[masm48]

Does this rule still apply if it is an employer plan?  AND he is still working?

[dmertz]

The still-working rule does *not* apply to IRAs, including SEP and SIMPLE IRAs.  Even though contributions can be made to SEP and SIMPLE IRAs after 70½, the SEP and SIMPLE IRAs are subject to RMDs for the year the individual reaches age 70½ and thereafter, whether or not still working.  The still-working exception to taking RMDs applies only to qualified retirement plans (401(k), 403(b), 457(b), 401(a), ESOP and federal TSP plan), and only if the individual is not a more than 5% owner of the company in the year the individual reaches age 70½.