I retired from Company XYZ in 2018, I was a member of a class action lawsuit which was just settled at the end of 2023. I received a W-2 for 2023 and I understand that this is taxable income to me. Are there any limitations to placing some of that money into an IRA, up to allowable limit of 7,500 since I'm 50+ ? I'm a bit confused because I am retired yet I received a W-2, so I'm confused as wether or not that has any impact. Thanks!
The IRS treats the amount in box 1 of your W-2, minus any amount in box 11, as compensation eligible to support an IRA contribution for the year of the W-2. For reference, see "What is Compensation?" in IRS Pub 590-A.
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