Retirement Accounts

Are You Too Old to Open a Roth IRA?

You can open Roth IRA accounts at any age, whether you’re a 22-year-old starting your career or a 70-year-old hoping to retire in a couple of years.

Stephanie Faris
Published February 1st, 2021
Table of Contents
Key Takeaways
  • There is no maximum age for putting money into a Roth IRA.
  • To enjoy tax-free distributions, you’ll need to reach 59½ and have the funds in the account for at least five years.
  • There are annual contribution limits based on your income.

It’s never too late to start saving for retirement. You can open Roth IRA accounts at any age, whether you’re a 22-year-old starting your career or a 70-year-old hoping to retire in a couple of years. In fact, if you’re over the age of 59½, you can freely take the money that you've contributed out of your Roth IRA without facing penalties.

But if you plan to open an IRA closer to retirement, there are a few things you’ll need to know. It’s important to pay close attention to the tax treatment and the rules when it comes to distributions to make sure it’s the right option for you.

Are You Too Old to Open a Roth IRA?

There’s no Roth IRA age limit for contributing funds, although there is a limit on when you can start taking them out. You’ll have to wait until the age of 59½ to start withdrawing the funds to avoid taxes and penalties.

The important thing to consider as you’re looking into opening a Roth IRA account is that you’re paying taxes when you put the money in. So if you plan to use the money when your income drops – as usually happens after you retire – you could lose money on the deal. Remember, with a Roth IRA, you pay taxes when you put the money in, not when you retire, and when you retire you’ll be at a lower tax bracket.

How Roth IRAs Can Help Save for Retirement at Any Age

If you’re nearing retirement, you might be at an advantage. You could be holding back because you think there’s an age requirement for Roth IRA contributions, but in the later years of your career, you’re probably earning more than you did in your earliest years, when you might think you should have started your IRA.

When you’re asking how old is too old to open a Roth IRA, it’s important to look at the years between now and the age when you’ll start taking distributions. If you only have five or ten years, you’ll probably need to put the full amount you’re allowed each year to see decent earnings on the money.

Distributions from Roth IRAs

The number to keep in mind when it comes to Roth IRA age is 59½. That’s the minimum age that you can start taking the money out of the account. Unlike a Traditional IRA, though, a Roth IRA doesn’t require that you start taking money out by a specific age. You can leave as much or as little in the account as you want until your death.

But while there is no Roth IRA contribution age limit, there is something called a 5-year rule. You won’t pay taxes on a Roth IRA when you take the money out since you paid taxes on the income before you put it in. However, to enjoy those benefits, it has to meet the 5-year rule. You can’t take any of the earnings on your account contributions without paying taxes until it’s been in the account for five years.

Income Requirements for Roth IRAs

There may not be an IRA age limit for contributing, but there is an income requirement. The first rule is that you must have earned income. If you’ve left the workforce, you probably won’t have the type of income that you can put toward a Roth IRA.

There is no Roth contribution age limit, but there is an income limit. For 2021, if you make more than $140,000, or $208,000 as a joint filer, you can’t contribute to a Roth IRA. If you make $125,000 and over, or $198,000 and over as a joint filer, the maximum you can contribute will be reduced.

Contribution Limits for Roth IRAs

One of the top considerations, as you’re researching how old to start a Roth IRA, is the annual contribution limit. This fluctuates from one year to the next. For 2021, the limit for those under the age of 50 is $6,000.

But if you’re asking about the Roth age limit, you may qualify for an extra amount. Those age 50 and over have the option to contribute additional $1,000 as a catch-up contribution. So if you’re at least age 50, you can contribute $7,000 to your Roth IRA in 2021.

Does The Roth 5-Year Rule Apply to Older Investors?

No matter what your age, the 5-year rule applies to you. You’ll need to leave the earnings on your contributed funds in the account for at least five years to avoid being taxed on them. The good news is, there’s no maximum age for Roth IRA funds to stay in the account, so you can leave them in there beyond five years without penalty.

Converting to a Roth IRA

Starting an IRA at 40, 50, 60, or beyond is only one option. You can also convert a Traditional IRA to a Roth IRA. If you’re still working, you can’t convert your employer-provided 401(k) to a Roth IRA, but you may be able to make an in-plan conversion to a Roth 401(k) if your employer allows it.

If you’re asking, “Can I open a Traditional and Roth IRA,” you may be wondering if you can convert your Traditional IRA to a Roth IRA. While there’s no age limit to do so, you will face tax repercussions if you convert a Traditional IRA to a Roth IRA, so be sure to work with a professional to reduce that taxability.

Roth IRAs and Social Security

When considering whether a Roth IRA is good or bad, tax-free distributions at retirement is usually the top consideration. If you have money in your Roth IRA, you will enjoy tax-free withdrawals to supplement the other money you have coming in.

What happens if you’re already on Social Security, though? As long as you have earned income, you can put money into a Roth IRA. Social Security and other retirement income don’t count as earned income, though. So this will typically only be an option if you continue to work after retirement.

Final Thoughts

Whether you’re approaching retirement, still working toward it, or already retired, you can benefit from investing in a Roth IRA. As long as you’re willing to leave the money alone for at least five years, you can enjoy tax-free distributions starting at the age of 59½, regardless of when you put the money in. We suggest consulting with a Certified Financial Planner® to best assess your retirement situation and see if opening or converting to a Roth IRA may make sense in your particular circumstances.

Retirement Accounts
Understanding 401(k)s
401(k) Rules
Cashing Out your 401(k)
Understanding Roth 401(k)s
Roth IRA Basics

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Author
Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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