The rules of IRA contributions can be confusing. Get them wrong and you could make a costly mistake or lose out on a chance to save more for retirement. In this video we’ll cover these 10 IRA contribution rules:
1. Contributions limits
2. Catch-up contribution limits
3. Income limitations on IRA contributions
4. Limits on deducting IRA contributions
5. Roth IRA contribution income limits
6. Age limits on IRA or Roth IRA contributions
7. Spousal IRA
8. Contributing to both a 401(k) AND an IRA
9. What if you contribute too much?
10. 2021 contribution deadline
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I’m also the author of Retire Before Mom and Dad–The Simple Numbers Behind a Lifetime of Financial Freedom (
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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LEARN MORE ABOUT: IRA Accounts
INVESTING IN A GOLD IRA: Gold IRA Account
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REVEALED: Best Gold Backed IRA
Rob if I contribute lets say $4,000 how much money would i get back and in what period of time. I'm approaching senior citizen status and never really thought about stuff, since i picture myself living the Bohemian in a tropical place living off the sea and eating coconuts and mangos and other wild fruits. But in all seriousness brake down about how one can get back from $4,000. Thinking about buying a trailer when i retired and moving to Lancaster CA. and living next to an Okie
I have a SEP and I don't have a regular IRA even thoughI am self employed and I get a W2. I found I was going to owe $4000 in taxes and my SEP DOES NOT seem to effect the taxability but if I have a regular IRA it seems I can contribute and reduce my taxability. My return is due on an October extension. However, I have not set up a simple IRA. Can I set one up now (April 2022) and contribute back for 2021 even though I did not set one up before?
Hi Rob / anyone that can please provide input. About 2 weeks ago, I tried to set up a backdoor Roth IRA for the year 2021. However, I discovered that I can contribute but CANNOT convert to Roth IRA from a traditional IRA for 2021 at this point in the year. The contribution/conversion has to happen in 2021 itself. My question is, can I transfer back the money I contributed to my Traditional IRA without any tax impact or issues? It has accrued about 3 pennies so far. I also just submitted my taxes for 2021 today. I would greatly appreciate anyones insight/input into this issue. Thanks in advance.
Ooops, I just heard your answer. Thanks
If I make a catch-up contribution now and then file my taxes before the deadline in April should the contribution be filed in my 2021 taxes or next year filing ?
A Roth IRA question. Is there any employer sponsored retirement plan that would disqualify a person from opening a Roth IRA? Old fashion pension or teacher retirement
Thanks for the info. Did I understand correctly that no matter how old a person is , if they have earned income they can continue to contribute to a traditional ira?
Tom Brady is 44 …
Hey Rob! Thanks so much for this great content 🙂 i just have a question, how different is 401k than traditional IRA? Thanks in advance
When is the contribution deadline for a SEP IRA for Schedule C income? Assume an extension has been filed by the individual and they are entitled to file their return by October 15 of the given year. Since they won't know the amount of net income on their Schedule C until their return is prepared, don't they have until they file their return to make the SEP IRA contribution? In other words, you don't know on April 15th what net income you will have, so you wait until that is calculated. Correct?
New subscriber because you present the material in such ca clear concise manner.
If u r max contributing to ur Roth IRA and are receiving dividends, can u reinvest or will that trigger a penalty for going over 6k?
When determining MAGI for Roth contribution limit, do social security, retirement income, and capital gains count? Do any of them depend on age?
Another VERY important IRA topic to note (especially for higher income earners) is the IRS' "pro rata rule". This can really bite you when you go to do a Roth conversion and provides a strong argument for not rolling old traditional 401(k) assets into a traditional IRA if you leverage the "backdoor" Roth IRA.
Hello Rob, when contributing to a Roth I have heard when or if able to max out your contributions it should be done sometime in the first half of the calendar year for best overall returns/growth.Curious if you may know why. Thanks for your informative videos.
You made mention of taxable compensation but could have made that more clear. I looked it up to be sure as I always considered it to only include earned income. This is what I found:
Compensation
W-2 Income Wages, salary, tips, bonuses, professional fees, amounts received for performing personal services and certain scholarship or fellowship payments. The safe harbor is the amount reported in box 1 of Form W-2 reduced by any amount in box 11.
Commissions
Self-employment income – Net earnings from self-employment in a trade or business when your activities in the business contribute to the income produced – reduced by the deduction for contributions to an employer plan and reduced by self-employment taxes.
Alimony – If you have to pay tax on the alimony you receive, you can use it as a source of compensation for making an IRA contribution.
Non-taxable combat pay – This is an exception to the rule that compensation must be taxable.
Income that would not qualify include:
NOT Compensation
Earnings from property Rental income, interest and dividends.
Pension and annuity income, Social Security, required distributions from IRAs or employer plans.
Deferred compensation distributions from non-qualified deferred compensation plans – income deferred from a prior year. While it would have counted in the year it was earned, it does not count when the receipt of the income is postponed to a later year.
Partnership income if your activities do not contribute to the income produced, you cannot use it as a basis for making an IRA contribution.
Amounts excluded from income – Amounts such as foreign earned income that are excluded from the U.S. tax return cannot be used as the basis for making an IRA contribution. There is an exception for non-taxable combat pay.
Unemployment benefits – Since the definition of compensation is wages, salary or tips, unemployment income clearly is excluded.
Disability payments
Hi Rob, if I currently contribute to a Roth, but marry someone who makes a lot more money than I do… I can no longer contribute to my Roth?
Hi Rob: @Rob Berger
Thanks for the video and I have a question regarding to item 8. I have 401k at work with 50/50 for pretax and Roth 401k. The 401k at work is maxed out at 19,500 limit for 2021. This is not included the match yet. I recently opened Roth IRA with Vanguard and contributed 6000 dollars for 2021 (note that my total income is less than 204,000 for married jointly income). Is it legally to max out both 401k (that has roth) and Roth IRA limit? Thanks.
Do you recommend dollar cost averaging Roth IRA contributions over the course of the year, or putting in the full 6k and investing it all at the beginning of the year?
I had been contributing to an after tax 401k for a number of years and recently rolled that in to my Roth IRA. I understand that I will have to pay tax on any gains I made while it was in my after tax 401k. My question is how do I figure how much of that was gains? Thanks for the help in advance.
On the IRS website they use the term taxable compensation. is that the gross amount a person is paid (that is taxable)? if so, does that mean to max out a spousal account one person would need to make at least 12k of taxable income?
If only you know what the future says, you'll know that indeed cryptocurrency is the future, investing in it now will be the wisest thing to do. Hold!!! And you"'ll thank yourself
Rob, can you do a video on how to calculate your MAGI with respect to the ability to contribute to Roth IRAs? The IRS.gov worksheet is very confusing and I'm not sure what I should do for 2022 and if I need to back out 2021.
Question 1: I maxed out my roth for 2021 in December. If I were to add more money on January will it be under 2022? Or would I be overcontributing to the 2021 year since I added more money before April 15th 2022.
Question 2: Do reinvested dividends count as personal contribution? Meaning, if I added $100 of reinvested dividends into my roth can I still add $6,000? Or $5,900?
Thanks!
If you put your minor children on your payroll you can offset the inome they make with an IRA contribution.
Thank you for the helpful videos and informative weekly email. If contributions to a traditional IRA are non deductible, what is the primary value to it versus contributing instead to a regular brokerage account?
Hi Rob, great video as always! I recently joined a company that offers both Roth and Pre tax options in their 401k. Do you have any recommendations on how to allocate contributions? I conservatively set mine up to 50/50 in each because I wasn't sure how to anticipate future tax brackets.
So if a person was to inherit a couple million dollars and no longer needed to work they cant contribute to any IRA because they no longer have income received by working???..is there a loophole to this rule?
Rob what are the limits to contributing to a minor with a Custodial Roth IRA?
Rob when I was a minor my dad contributed a few thousand to my Custodial Roth IRA even though I had no job/income. Will the IRS be on to me in the future? I don’t want to be in a situation where Im 60 with more than a million in my roth and then the IRS looks at my history and shuts it down.
IRS/Congress needs to make this stuff simple enough for a 9th grader to understand – no need to have a CPA/Accounting Finance degree to have an IRA
Hi Rob my understanding is that in order to contribute to IRA it has to be an earned income (i.e. paycheck from employer or job) not taxable compensation (i.e. dividend, realized short/long term gain from investment…). Am I wrong on this? Can you clarify?
Hey Rob: thanks for the video, I am a big fan of your work. What do you think will happen with the backdoor and megabackdoor Roth IRA conversions/rollovers? Do you think they will no longer be allowed? A video explaining what they are and where you see we are gonna get to this year would be very enlightening! Thank you very much!