Before 2019’s SECURE Act, you could not contribute to a traditional IRA account in the year you turned 70 1/2 and later years. Under the new SECURE Act, this age limit is repealed for contributions starting in 2020.
As life expectancy for the average person increases, people are working longer to be able to afford the lifestyle they want in retirement. If you are working in your seventies, contributing to a traditional IRA may move some of your taxable income to a later year when you may be in a lower tax bracket.
You can still begin making qualified charitable distributions (QCDs) directly from an IRA to a qualifying charity starting at age 70 1/2. This age was not changed with the SECURE Act. However, if you make deductible IRA contributions after 70 ½, the amount of QCD that is excluded from income may be limited so be sure to check with your tax adviser.
As with most things in the tax world, the answer to whether making IRA contributions or doing QCDs later in life is a good idea is “It depends.” Some of the factors to weigh; your retirement lifestyle goals, desire to give to charitable organizations, and how long you want to stay in the workforce.
Whether you do your own planning or talk to a retirement planning professional, it is a good idea to outline what you want to accomplish and then figure out possibilities for achieving that.
Brandon Harbeke, CPA