I have One Question related to IRA contribution

[wayneyee]

 I am 61 years old and currently receiving Long term disability compensation from my company’s insurance company.  Each year, the insurance company sends me a W2 form on the taxable compensation payout shown in Box 1.  Can I use it to contribute to either an IRA or a Roth IRA

I have looked up on Google that I can contribute to an IRA since taxable income.  But some other websites state “Can not”.   So I have conflicting information.  So  What is the correct information

[BeckyLeeH]

• Everyone is eligible to make contributions to a traditional IRA, but a tax deduction for those contributions may not always be available.
• The IRS restricts who can claim a tax deduction for contributions to traditional IRAs based on various factors, such as income and employer-sponsored retirement plans.
• The IRS limits the amount you can deduct each year, and this amount is subject to change each tax year.
• The IRA deduction is an above-the-line deduction, meaning you can take it regardless of whether you itemize your deductions or claim the Standard Deduction.
  
  This link may help you determine if you are eligible for a tax deductible IRA contribution:
  
  
• https://turbotax.intuit.com/tax-tips/investments-and-taxes/deductions-allowed-for-contributions-to-a...

[wayneyee]

I still do not have exact answer from the expert.  Yes or No

[mmaherTE]

Yes you can contribute to either a traditional IRA or a Roth IRA.  Once you are 70 and 1/2 or older you can no longer contribute to a traditional IRA but you can still contribute to a Roth IRA. Here is a helpful link to the IRS page that explains this information. 

 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...  If you can't click on this link just copy it and paste it in your browser address bar.

[mmaherTE]

The IRS claims the following are earned income:

• Taxable income you earned as an employee, such as wages, salaries, commissions, and tips
• Profits from operating your business or farm
• Long-term disability pay, if received before the minimum retirement age****
• Union strike benefits

If you are not yet retirement age for your company your disability is a substitute for wage income and can be used to contribute to a traditional or roth IRA.  If you are of retirement age for your company your disability benefits no longer count as wages and can not be used towards contributions to an IRA.  

[wayneyee]

Is 62 the minimum retirement age? If so, I can not contribute my taxable long-term disability compensation to my IRA when I reach that age.  

Thanks

Wayneyee

[Terri Lynn]

Hello, Wayneyee!

1. Can you contribute to a Traditional IRA or a Roth IRA, based on your long-term disability income reported on your W2 in Box 1?

• In general, yes, however, you must also subtract any amounts listed in box 11 of the W2, from the box 1 amounts on your W2, to derive at the amount that is considered as earned income for IRA contribution purposes.

2. Is 62 the minimum retirement age? 

• You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits only when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will be higher.
• As of current regulations, you are not prohibited from contributing to an IRA based on your age; meaning you can continue to contribute to a traditional or Roth IRA regardless of how old you are, as long as you have earned income to do so.

For Additional Information on IRA's, please see the following:

• Retirement topics - IRA contribution limits 
• IRA Contribution Limits 
• Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) 

Please feel free to reach backout with any additional questions or concerns you might have!

Have an amazing rest of your day!

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**Select the post that answers your question by clicking on "Mark as Best Answer.”

[Terri Lynn]

Hello, wayneyee!

In general, this depends on when you decide to start colecting your Social Security benefits. . Your benefit will be higher the longer you delay your start date. This adjustment is usually permanent.

Is 62 the minimum retirement age? 

• You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits only when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will be higher.

" I can not contribute my taxable long-term disability compensation to my IRA when I reach that age. " 

• As of current regulations, you are not prohibited from contributing to an IRA based on your age; meaning you can continue to contribute to a traditional or Roth IRA regardless of how old you are, as long as you have earned income to do so.

For Additional Information on IRA's please see the following:

• Retirement topics - IRA contribution limits 
• IRA Contribution Limits 
• Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) 
• When to Start Receiving Retirement Benefits - SSA 

Please feel free to reach backout with any additional questions or concerns you might have!

Have an amazing rest of your day!

 *Please say "Thanks," by clicking the thumbs up icon at the bottom of the post.
**Select the post that answers your question by clicking on "Mark as Best Answer.”