Eligibility Requirements for IRA

Eligibility Requirements for IRAs

BECU Investment Services

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Individual Retirement Accounts (IRAs) can be a powerful tool for funding retirement--but not everyone is eligible to open one. Learn more about IRA requirements and whether you qualify.

Anyone who earns taxable income may contribute to an Individual Retirement Account (IRA) for themselves or their spouse. How much you contribute and for how long is determined by your income level and whether you file taxes jointly as part of a married couple based on your modified adjusted gross income. IRAs are available in two forms: Traditional and Roth.

Who Can Contribute to a Traditional IRA?

Traditional IRAs allow you to contribute pre-tax income toward saving for retirement. If you or your spouse earn any amount in taxable income during the past tax year, you are eligible to contribute to an IRA. Funds are eligible for withdrawal starting at age 59½. You are required to take regular, periodic distributions and pay taxes on Traditional IRA distributions upon reaching age 70½ if you have not begun already.

You are also required to stop making income-based contributions to a Traditional IRA once you reach age 70½. However, you may make rollover contributions to a Traditional IRA from other qualified retirement plans such as a Roth IRA, regardless of age or employment status.

Who Can Contribute to a Roth IRA?

Roth IRAs allow you to invest post-tax income toward retirement, but only if you earn up to a certain dollar amount per year. Income may be earned from self-employment or from wages, salaries, commissions or bonuses paid by an employer. Interest, dividends and rental income are not considered as income for the purposes of IRA eligibility. To be eligible to contribute to a Roth IRA, you or your spouse must have earned taxable income for the year 2018 in an amount less than your modified adjusted gross income (MAGI) and tax filing status:*

  • $199,000 (phasing out from $189,000) if you are married filing jointly.
  • $135,000 (phasing out from $120,000) if you are single or head of household

There is no age limit for contributing to a Roth IRA. You may contribute well past age 70. And Roth contribution amounts (not including investment profits) may be withdrawn tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.

IRA Eligibility Comparison Chart: Traditional vs. Roth**
Traditional IRA Roth IRA
For the Year 2018
Maximum age to contribute

70.5

None

Tax-deductible contributions based on modified adjusted gross income
Yes
No
Annual contribution limit

$5,500 or $6,500 for ages 50+

$5,500 or $6,500 for ages 50+

Maximum age for required distributions

70.5

None


Saving for Retirement? We Can Help!

Whether you've recently started your first job or are just around the corner from retiring, the Financial Advisors*** from BECU Investment Services can help you create a personal retirement plan portfolio. Click here to set up a complimentary consultation or call 206.439.5720.

BECU does not provide tax advice. Please contact your tax advisor for more information.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. 

*The Internal Revenue Service (IRS). “Amount of Roth IRA Contributions That You Can Make for 2018.” 20 October, 2017. 
**The Internal Revenue Service (IRS). “Traditional and Roth IRAs.” 10 July, 2018

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