Post 59.5 withdrawal from TIRA

Submitted by DAVID STEWART on Sat, 2020-02-29 02:10

My wife is over 59.5 and has a TIRA. If she takes a withdrawal 2020, can she also make a contribution and take the deduction for 2020 on our taxes? We file joint. We opened the account in 2018 and made a contribution in 2018 and in 2019, both within the limits of my earned income. I have read through Pubs 590 A & B, but cannot seem to determine if this is allowed or what the tax consequences would be.



Submitted by Alan - IRA critic on Sat, 2020-02-29 04:27

  • Yes, her distribution does not prevent her making a contribution subject to the usual requirements for the deduction. However, if you are getting the Savers tax credit (different from the deduction) the distribution will undermine the credit for 3 years. 
  • From a tax standpoint, you might be better off if she just reduces the distribution by the amount she would contribute. However, if she needs the distribution now, she will have until 4/15/2021 to make a 2020 contribution with the deduction offsetting the taxable income for the distribution. 
  • The analysis is simpler if the saver’s credit is not involved.

Submitted by DAVID STEWART on Sat, 2020-02-29 16:02

Thank you for the excellent clarification Alan.  We will plan accordingly.

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