If your client is age 50 or older, he or she may be able to contribute extra amounts to their retirement plan. While these are called “catch-up” contributions, a taxpayer is eligible even if he or she have always contributed the maximum amount.
The extra amount that can be contributed depends on the type of retirement plan. Here is the regular amount, the extra amount, and the total amount a taxpayer can contribute to their retirement plan if they are age 50 or older:
2016 Individual Retirement Accounts (Traditional and Roth IRAs)
A taxpayer must have at least as much earnings from their job or business as they contribute to their retirement plan. Also, the extra contribution can be made as long as the taxpayer will be age 50 or older sometime during that year.
|You are 55, earn $35,000 from your job, and are single. If your employer has a 401(k) plan, you can contribute up to $24,000 for 2016. Additionally, you can contribute up to $6,500 to your IRA, which could be either a traditional IRA or a Roth IRA.|
Julie Welch (Runtz) is the Owner of Meara Welch Browne, P.C. She graduated from William Jewell College with a BS in Accounting and obtained a Masters in Taxation from the University of Missouri-Kansas City. She serves as a discussion leader for the AICPA National Tax Education Program. She is co-author of 101 Tax Saving Ideas.