IRA contributions and Required Minimum Distributions

Most of us have retirement savings to help us afford the lifestyle we want when we retire. Some savings are in Individual Retirement Accounts (IRAs), usually managed by the financial institutions of our choice.

What a lot of us don’t know are the contribution and withdrawal rules governing IRA accounts and the penalties for non-compliance.

For 2016, the maximum you may be able to contribute to a traditional or Roth IRA is:

  • $5,500 ($6,500 if you are age 50 or older), or
  • your taxable compensation for the year.

This is the maximum you may contribute to any or all IRAs combined. The penalty you pay for contributing more than is allowed is an excise tax of 6 percent on amounts over the contribution limit.

You may contribute to a Roth IRA for as long as you want, as long as you continue to receive compensation.

However, there are other IRA rules that may limit or eliminate your ability to contribute to an IRA, including income, filing status and the amount of your taxable compensation. Tax deductions may be limited based on whether you or your spouse has an employer retirement plan if your income is above certain levels.

If you are age 70½ or older, you may not contribute to a traditional IRA at all. Generally, you must make withdrawals from a traditional IRA by April 1, of the year following your 70½ birthday; failure to do so requires that you pay a 50 percent excise tax on the amount you are required to take. You can request a waiver of the tax if you did not take your required withdrawal.

You’re taking the right steps to help secure your retirement future with an IRA; following the rules helps you maximize your retirement savings.

For more information, read Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) at

Last updated: February 2017

IRA contributions and Required Minimum Distributions

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