When can you not contribute to a traditional ira?

A 16-year-old with a part-time job can open an IRA and start contributing, but a 20-year-old full-time student with no income cannot make any contribution to the IRA. Earned income is a requirement to contribute to a traditional IRA, and your annual contributions to an IRA cannot exceed what you earned that year. In the case of a traditional IRA or a Roth IRA, you can't get a direct return from the company with your contributions, but some employers do offer incentives to employees who open or contribute to an IRA, such as a gift card or other type of bonus. There is a different set of income thresholds for traditional IRA tax deductions for married couples, in which one spouse is covered by an employment retirement plan and the other spouse doesn't work or doesn't work, for example.

Traditional IRA contributions aren't limited by the amount you earn annually, which means that anyone with earned income is entitled to participate, but your contribution may not be fully deductible. However, conversions cannot be made with amounts that must be distributed from your traditional IRA for a particular year. See publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more information on IRA losses. Your total contributions to your IRA and your spouse's IRA cannot exceed your combined taxable income or the annual IRA contribution limit multiplied by two, whichever is less.

However, to be eligible, you must have taxable compensation of an amount equal to or greater than the amount of your IRA contribution. Do not use Form 8606, Non-Deductible IRAs (PDF/PDF, Non-Deductible IRAs) to declare non-deductible contributions to a Roth IRA. If your income is below a certain level or if you (or your spouse) don't have an employer-sponsored retirement plan, your contribution to the traditional IRA is fully deductible. If you don't have taxable compensation but file a joint return with an earning spouse, you can open an IRA in your name and make contributions through a spousal IRA.

Many people don't know that they can make a spousal contribution to an IRA on behalf of a non-working spouse as long as one spouse has sufficient taxable compensation. As long as you're still working, there's no age limit to be able to contribute to a traditional IRA.