Can I Contribute to a SIMPLE IRA After 70.5?

The Savings Incentive Match Plan for Employees -- better known by the acronym SIMPLE -- is a retirement plan for businesses with 100 or fewer employees who received at least $5,000 in compensation during the previous year. A SIMPLE IRA provides the same tax-deferred savings as traditional IRAs. However, unlike with a traditional IRA, the Internal Revenue Service may not prohibit contributions made after you turn 70 ½ years of age.

IRS SIMPLE IRA Contribution Rules

Internal Revenue Service regulations say that you’re allowed to contribute to a SIMPLE IRA past the age of 70 ½ as long as you continue working and expect to earn at least $5,000 in the current calendar year. According to the most current information, the annual contribution is $15,500 for anyone over 50 years of years. This amount includes a $12,500 standard limit and a $3,000 catch-up contribution only available to employees age 50 and over.

Required Minimum Distribution Requirement

Even though the IRS allows for contributions after you've turned 70 ½, you still must comply with required minimum distribution rules and begin withdrawing money from the account each year. The size of each required annual distribution depends on your age and the balance in your Simple IRA at the end of the previous year.

While taking money out of your retirement plan while still contributing might seem counterproductive, it can be especially helpful if you got a late start on saving for retirement. Although the size of each RMD depends on your age and the balance in your account at the end of the previous year, it’s unlikely to ever be greater than your annual contribution. For example, at age 70 ½, the RMD for an account with a balance of $200,000 is about $7,300. This still increases your account balance by up to $8,200 for the year if you make the maximum contribution. Your balance also will increase by the amount your employer contributes. In a worst-case scenario, you’d at least be replacing most of an RMD with your annual contribution.