Secure Act, Part 3 – IRA Contributions

In this third post on the Secure Act changes, I want to talk about a new ruling that could greatly benefit late retirees or part time retirement workers. Prior to the law passing, Traditional IRA contributions could not be made past age 70 ½, making it more difficult for individuals who are still working to defer income. The new law removed the age limitation and allows individuals who have earned income to make contributions.

For individuals who are still working, this could be a nice tax relief, especially if you are no longer able to participate in the 401(k). Since many workers that are over 70 ½ are not working full time but rather doing part-time work or consulting, this is helpful if you want to defer income.

However, if you were thinking of making contributions only to then distribute them by a QCD (see last week’s post), think again. The Secure Act has a clause that reduces any QCDs by the total post 70 ½ deductible Traditional IRA contributions (Levine, 2020). So you cannot just make tax deductible contributions for the sole purpose of turning around and immediately making a tax-free gift to charity. 

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.

1.Levine, Jeffrey, and Team Kitces. “SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges.” Nerd's Eye View | Kitces.com, 9 Jan. 2020, www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/.