Who Can’t Have a Roth IRA?

Income and age limits for Roth IRAs

Not everyone can have a Roth IRA. If you earn too much or too little, you will not be able to contribute to this type of individual retirement account (IRA).

A Roth IRA allows qualified withdrawals on a tax-free basis if certain conditions are satisfied. Roth IRAs are similar to traditional IRAs, with the biggest distinction between the two being how they’re taxed. Roth IRAs are funded with after-tax dollars; this means that the contributions are not tax deductible. But once you start withdrawing funds, the money is tax free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.

This and other key differences make Roth IRAs a better choice than traditional IRAs for some retirement savers. However, Roth IRAs are not available for everyone. In this guide, we’ll take a look at who can’t have a Roth IRA.

Key Takeaways

  • Roth individual retirement accounts (Roth IRAs) are open to anyone who earns income in a given tax year, as long as they don’t earn too much or too little.
  • If your income is too high, you are barred from contributing to a Roth IRA.
  • Conversely, you can only contribute as much as you earn in a given year to your Roth IRA.
  • There is no age limit for opening a Roth IRA, and you can keep funding this account long after you retire.

Income Limits for Roth IRAs

Anyone who has earned income can have a Roth IRA, as long as their income for a given tax year is neither too high nor too low. If your annual income is above a certain amount, which the Internal Revenue Service (IRS) adjusts periodically, then you become ineligible to contribute.

If you file taxes as a single person, your modified adjusted gross income (MAGI) must be less than $129,000 for tax year 2022 to contribute the full amount. Married couples filing jointly must earn less than $204,000. In 2021, the limits were $125,000 for single individuals and $198,000 for married couples filing jointly.

Above these incomes, the amount that you can contribute to a Roth IRA begins to phase out. In 2022, individuals whose MAGI is $144,000 and above and married couples filing jointly whose MAGI is $214,000 and above cannot contribute to a Roth IRA. In 2021, the limits were $140,000 for single individuals and $208,000 for married couples filing jointly.

Conversely, you can never contribute more to your IRA than your earned income in that tax year. If you don’t earn anything in a tax year, you will be ineligible to contribute to your Roth IRA for that year. You can still hold the account, but you won’t be able to add to it.

It’s also worth paying attention to the definition of earned income that the IRS uses to determine eligibility for Roth IRAs. For individuals working for an employer, compensation that is eligible to fund a Roth IRA includes wages, salaries, commissions, bonuses, and other amounts paid to the individual for the services that they perform. It’s generally any amount shown in Box 1 of the individual’s Form W-2.

For a self-employed individual or a partner or member of a pass-through business, compensation is the individual’s net earnings from their business, less any deduction allowed for contributions made to retirement plans on the individual’s behalf and further reduced by 50% of the individual’s self-employment taxes.

Money related to divorce—alimony, child support, or in a settlement—also can be contributed if it is related to taxable alimony received from a divorce settlement executed prior to Dec. 31, 2018.

What sort of funds aren’t eligible? The list includes:

  • Rental income or other profits from property maintenance
  • Interest income 
  • Pension or annuity income 
  • Stock dividends and capital gains   
  • Passive income earned from a partnership in which you do not provide substantial services

When using this definition of compensation, if your income either is above the Roth IRA limit or is zero for a tax year, then you won’t be able to contribute to a Roth IRA for that year.

If your earned income is above a limit set by the IRS, then you won’t be able to contribute to a Roth IRA for that tax year. And you can only contribute as much as you earn in a tax year. If you earn nothing, then you can’t contribute anything for that year.

Age Limits on Roth IRAs

Though Roth IRAs are often thought of as retirement accounts and most often used in this way, there are no limits on who can contribute to them and when (as long as they meet the income requirements above).

In other words, there is no age threshold or limit for making Roth IRA contributions. For example, a teenager with a summer job can establish and fund a Roth. (It might have to be a custodial account if they’re underage.) On the opposite end of the spectrum, an employed person in their 70s can continue to contribute to a Roth IRA.

People of all ages can also contribute to traditional IRAs. In the past, participants in a traditional IRA could not make contributions after age 70½. But with the December 2019 passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, there is no longer an age cutoff on traditional IRA contributions.

Also, the fact that you participate in a qualified retirement plan has no bearing on your eligibility to make Roth IRA contributions. So if you have the money and meet the income limitations, you can contribute to a 401(k) plan at work and then contribute to your own Roth IRA.

Can everyone contribute to a Roth individual retirement account (Roth IRA)?

Anyone who has an earned income can contribute to a Roth individual retirement account (Roth IRA), provided that they meet the income limits. This means that you can have a Roth IRA for anyone and everyone in your family who has earned income. In fact, there’s even an exception for your spouse. Under a spousal IRA, a spouse who hasn’t earned taxable income can make a contribution of up to $6,000 (or $7,000 if age 50 or older) as long as the other spouse did.

Can retirees contribute to a Roth IRA?

Retirees can continue to contribute earned funds to a Roth IRA indefinitely. You cannot contribute an amount that exceeds your earnings, and you can only contribute up to the annual contribution limits set by the Internal Revenue Service (IRS). People with traditional IRAs must start taking required minimum distributions when they reach age 72, but there is no such requirement for Roth IRAs.

Can you open a Roth IRA at any age?

There is no age limit to open a Roth IRA, but there are income and contribution limits that investors should be aware of before funding one.

The Bottom Line

Roth IRAs are open to anyone who earns income in a given tax year, as long as they don’t earn too much or too little. If your income is too high, you are barred from contributing to a Roth IRA, and you can only contribute as much as you earn in a given year to your Roth IRA.

Otherwise, the eligibility rules for Roth IRAs are broad. There is no age limit for opening a Roth IRA, and you can keep funding this account long after you retire.

Article Sources

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  1. Internal Revenue Service. “Traditional and Roth IRAs.”

  2. Internal Revenue Service. “Retirement Topics — IRA Contribution Limits.”

  3. Internal Revenue Service. “Amount of Roth IRA Contributions That You Can Make for 2022.”

  4. Internal Revenue Service. “Amount of Roth IRA Contributions That You Can Make for 2021.”

  5. Internal Revenue Service. “Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs),” Page 6.

  6. Internal Revenue Service. “Self-Employment Tax (Social Security and Medicare Taxes).”

  7. Internal Revenue Service. “Publication 504: Divorced or Separated Individuals,” Page 18.

  8. Internal Revenue Service. “Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs),” Page 7.

  9. Internal Revenue Service. “Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs),” Page 38.

  10. Internal Revenue Service. “Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs),” Page 5.

  11. U.S. Congress. “H.R.1994 — Setting Every Community Up for Retirement Enhancement Act of 2019: Summary.”

  12. Internal Revenue Service. “401(k) Plan Overview.”

  13. Internal Revenue Service. “Roth IRAs.”

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