If you work after age 70 and a half, you won't need to take an RMD out of a 401 (k), 403 (b), or 457 (b) account until you leave that employer. That's because older savers who save in an IRA and receive a tax deduction for doing so could find themselves accidentally paying taxes on those charitable distributions, according to recent guidance from the IRS. As stated earlier in the “Earned Income” section, IRA owners who are married and file a joint return can use their spouse's income to support a contribution. In addition, contributing to an IRA at this age can have unexpected planning implications, such as changing your charitable giving strategy.
The Security Act complicates this strategy for people who want to continue saving on their IRA after 70 and a half years, but who also want to make those charitable distributions with their accounts. But keep in mind that making non-deductible contributions to an IRA will complicate your life when it's time to withdraw funds from your IRA. Non-spousal beneficiaries who inherited an IRA (either a traditional IRA or a Roth IRA) after that date must now withdraw money from the account within a decade. But if you can afford it, saving more money on tax-deferred accounts is beneficial, especially if you live a long time.
There are no joint IRAs, so one spouse can make a deductible contribution to their own account, while the other makes a charitable distribution, Slott said. Let's first review the RMD rules and then look at the different accounts you can use to save, starting with IRAs, and then let's also look at employers' plans and taxable accounts. If you are going to transfer money from one IRA to another, for example, to change custodian or consolidate accounts, request a direct transfer from one trustee to another. If you don't qualify to deduct your IRA contributions, you can still accumulate money up to the annual limit in a traditional IRA.
Individuals can rely on the amount that appears in the “Wages, Tips and Other Compensation” box, reduced by the amount that appears in the “Unqualified Plans” box, on their IRS Form W-2, wage and tax return, as eligible compensation, according to IRS publication 590-A, Contributions to Individual Retirement Agreements (IRA). Traditional IRA Once again, retirement savers won't be able to contribute more to traditional IRAs this year, but there may be changes in the way they work. If you are retired and your spouse has earned income, he or she can contribute to their own IRA and also make what is called a spousal contribution to your IRA. When specific advice is needed or appropriate, consult with a qualified tax advisor, certified public accountant, financial planner or investment manager.