If you qualify for an IRA, you have the opportunity to combine the powers of compound interest and tax savings to save up for retirement. The qualifications are actually not too strict at all.
Traditional IRA
There is no minimum age to qualify for a traditional IRA account; the participant must be under 70 ½ years of age and must have income from wages, salary, tips, commission, alimony, or self-employment to contribute to the account.
Types of money that cannot be contributed are pensions, earnings and profits from property rental income, dividends, loans, and interest on money.
There is no income limit for this retirement plan, and you can have a traditional IRA whether or not you are covered by another retirement plan.
If you would like to open a joint account with your spouse, your spouse must also have some form of compensation. However, you and your spouse may each have an IRA account, even if one of you is not employed.
Roth IRA
Unlike the traditional IRA, the Roth IRA has an income limit for its participants.
Single filers must have an annual income below $116,000. If you’re single and your AGI is below $101,000, you are eligible for a full Roth contribution. If you’re single and your AGI is between $101,000 and $116,000, you can put a gradually declining portion of your contribution into a Roth and the rest into a traditional IRA (partial Roth).
As of 2008, joint filers qualify for a full Roth if income is under $159,000. Joint filers with income between $159,000 and $169,000 qualify for a partial Roth. Over $169,000 and you don’t qualify for a Roth. Single married filers must earn below $10,000 per year.
Like the traditional IRA, you must have a form of compensation that would qualify as contribution for the IRA. Pensions, earnings and profits from property rental income, dividends, loans, and interest on money are not considered compensation.
There is no age limit to opening this plan, and no forced withdrawal at any age.
Simple IRA
There is no minimum age to qualify for a Simple IRA account; the participant must be under 70 ½ years of age and must have income from wages, salary, tips, commission, alimony, or self-employment to contribute to the account.
Types of money that cannot be contributed are pensions, earnings and profits from property rental income, dividends, loans, and interest on money.
There is no income limit for this retirement plan.
If you would like to open a joint account with your spouse, your spouse must also have some form of compensation.
Simplified Employee Pension (SEP) IRA
To qualify for the SEP IRA, you must be at least 21 years of age, must have worked for your employer for at least 3 out of the last 5 years, and must have received at least $500 in compensation from the employer for the tax year.
Your employer may establish a SEP IRA for an employee who is entitled to contribution if the employee is unable or unwilling to establish the SEP IRA.
Your employer exclude employees with retirement benefits covered by a union contract and employees that are nonresident aliens that received no earned income from sources in the U.S.
