Retirement plan contributions while taking RMDs form IRA
Hi folks,
I have a client ( an accountant to boot) who is turning 70 1/2 next year. He will begin taking RMDs but is still working his practice and wants to continue to make retirmemnt plan contributions. I know he cant continue to add to IRAs, but can he set up a simple- IRA or SEP-IRA plan and continue to make employee and employer contributions? ( he is the only worker so he wont have to worry about matching payroll of other employees)
Would the new assets in the SIMPLE or SEP if eligible to contribute to while taking RMDS then be counted in the IRA aggregate amount every 12/31 for RMD calculation?
Thanks!
Permalink Submitted by Alan Spross on Thu, 2010-06-10 17:26
Yes, a SEP or SIMPLE IRA can accept contributions as long as client is working but RMDs must also begin by the required beginning date. The prior year end balance would be used as usual to calculate the RMD.
While the allowable contribution might be lower than for a SEP or SIMPLE, client could instead make regular Roth IRA contributions as long as he has earned income and there would be no RMDs. He could also make Roth IRA contributions in addition to a SEP or SIMPLE IRA.
Permalink Submitted by John Jawor on Thu, 2010-06-10 17:37
Thanks very much.
Is there a document or IRS webpage with this info for the client file?
I have googled my question and no specific answer came up.
Thanks
JJ
Permalink Submitted by Alan Spross on Thu, 2010-06-10 17:46
IRS Pub 560 covers SEP and SIMPLE IRA plans. P 8 and 11 cover the RMDs due starting at age 70.5.
The Roth IRA contributions relative to SEP or SIMPLE plan participation is covered in Pub 590, p 58, last paragraph.