IRA owners over 70 1/2 still working making IRA contributions
IRA owner is 72, still working, and taking RMDs, but wasn’t permitted to make contributions. Can he now return to making contributions to his IRA due to SECURE Act?
IRA owner is 72, still working, and taking RMDs, but wasn’t permitted to make contributions. Can he now return to making contributions to his IRA due to SECURE Act?
Permalink Submitted by Alan - IRA critic on Thu, 2020-01-09 22:33
Yes, but he needs to be aware of the QCD anti abuse provision, as pre tax IRA contributions made in year 70.5 or later reduce any later QCDs. He should contribute more to his 401k if he is not at the maximum.
Permalink Submitted by ShipsnGiggles on Mon, 2020-01-13 20:01
I understand it has somethinbg to due to with making a deductible IRA contribution and QCD in the same tax year. I am having trouble understandig the potential abuse(s).Thx
Permalink Submitted by Alan - IRA critic on Mon, 2020-01-13 22:40
The abuse would be getting a tax deduction for the contribution and being able to distribute it tax free. This effect is clear if the person has no prior IRA balance, but phases out to the degree that the person accumulated the balance over many years and the post 70.5 contribution just adds a small portion to the total and is never needed to fund a QCD. Instead the anti abuse rule treats the last deductible contributions made (post 70.5) as funding QCDs thereafter.