Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

contributed to all of a person’s traditional IRAs for a particular year is the lesser of a particular dollar amount (called in this book the “Applicable Dollar Limit”) or the individual’s compensation income ( ¶ 5.3.02 ) for the year. The maximum regular contribution for a particular year to all of a person’s Roth IRAs is the exact same amount—minus the amount of regular contributions made to any traditional IRA(s) for that person for that year. § 408A(c)(2) . The Applicable Dollar Limit is the general dollar limit, plus (if the individual is age 50 or older as of the end of the year) the “catch-up contribution.” The general dollar limit is $5,000 for the years 2008–2011, to be increased by cost-of- living adjustments (COLA) if there is sufficient inflation in future years. § 219(b)(5)(A) , (D) ; see Notice 2009-94 , 2009-50 IRB 848, and http://www.irs.gov . The catch-up contribution (permitted only for the 50-and-older set) is $1,000 for 2006 and later years (with no COLA). § 219(b)(5)(B) . An individual who has compensation income ( ¶ 5.3.02 ), and who meets the other eligibility requirements (see ¶ 5.3.04 for Roth IRAs, § 219 for traditional IRAs) may contribute to either a traditional IRA or a Roth IRA (whichever he is eligible to contribute to), or both if he is eligible to contribute to both, provided that the total contributed to both types of accounts for the year may not exceed the lesser of (1) the Applicable Dollar Limit or (2) the individual’s compensation income for the year. Contributions made on the individual’s behalf to a SEP-IRA or a SIMPLE ( ¶ 8.3.13 ) are ignored for this purpose; these are considered employer contributions, and as such have no effect on the maximum the individual may contribute to his own traditional or Roth IRA. § 408A(f) . Any individual who has compensation income ( ¶ 5.3.02 ) may make a “regular” contribution to a Roth IRA—provided that his income is below certain levels. A. No age limit. There is no maximum age for contributing to a Roth IRA, as there is for contributions to a traditional IRA; a taxpayer can contribute to a Roth IRA even after age 70½. § 408A(c)(4) ; compare § 219(d)(1) ; § 408(o)(2)(B)(i) . B. Participation in an employer plan is irrelevant. An otherwise-eligible person who meets the income test may contribute to a Roth IRA regardless of whether he also participates in a retirement plan at his place of employment. Active participation in an employer plan is relevant only for determining whether a contribution to a traditional IRA is deductible. See § 219(g)(3) . C. Income must be below certain levels . Only an individual whose “modified adjusted gross income” (MAGI) is below certain limits can legally make a regular contribution to a Roth IRA. § 408A(c)(3) . Unlike the income limit formerly applicable to Roth conversions, the income limit applicable to making “regular” Roth IRA contributions did not disappear at the end of 2009. The definition of MAGI for purposes of the Roth IRA income limits starts with the MAGI definition used under § 219(g)(3) (income limits for making a deductible contribution to a traditional IRA when the individual is also a participant in an employer plan). However, MAGI for purposes of Roth contribution eligibility does NOT include the deemed distribution amount Who may make a “regular” Roth IRA contribution