IRA Contributions at RMD Age (and beyond)
We have a client who is of RMD age (turned 73 in 8/23). Client is still working and would like input on whether to make IRA contributions for 2023 (either Roth – under the income limit; or traditional).
For someone of this age who is still working at and beyond RMD age, what are the main considerations for whether or not to make these contributions? And if so, whether to go Roth versus Traditional?
Permalink Submitted by David Mertz on Wed, 2023-10-25 19:46
Since earnings in a Roth IRA are nontaxable once the client’s Roth IRAs are qualified, there’s probably no good reason for this client not to make a Roth IRA contribution if the client qualifies to make the contribution and has the funds to do so. If the client needs to push taxable income in to the future, the client could make a traditional IRA contribution instead if it would be deductible, but this contribution and earnings in the traditional IRA will eventually be taxable and the increased traditional IRA balance will mean an increase in future RMDs from the client’s traditional IRAs. Although the client could investing in capital investments outside of an IRA where long-term gains would be taxable ad long-term capital gains rates, it would be far better to put that money into a Roth IRA where gains can be tax-free.
Permalink Submitted by Alan - IRA critic on Wed, 2023-10-25 19:54
Also note that if the client makes a deductible TIRA contribution, it will impair the tax benefits of any later QCD to the extent of deductible IRA contributions made in any year after and including the year the client reached 70.5.