How Advisers Can Help Clients Navigate IRA Contributions After 70½

From the age cap on contributions to qualified charitable circulations and taxes, here are some things advisors require to examine with customers.

One of the arrangements of the SECURE Act removed the age limitation on conventional Individual Retirement Account contributions. Here is what your clients require to know to browse Individual Retirement Account contributions after 70 & frac12;

The SECURE Act got rid of the age cap on contributions to conventional Individual retirement accounts which had previously been 70 & frac12; This implies that as long as someone has made income, they are eligible to contribute to an IRA no matter their age. This now puts traditional Individual retirement accounts on an equal opportunity with Roth IRAs and 401( k) s in regards to not having an optimum age constraint for making contributions.

RMDs and Individual Retirement Account Contributions

Your client will need to take RMDs from their traditional IRA account once they reach the needed age no matter whether or not they continue to make contributions to the account. It is very important to weigh the tax advantage of making pre-tax contributions now versus the fact that the contribution will eventually need to come out as part of the client’s RMD and be taxed at that point in time.

Morningstar’s Christine Benz explains that a person of the significant benefits of investing inside of a traditional IRA account is the chance for tax-deferred development. She includes that contributions made later on in life to a standard Individual Retirement Account will have fewer years to enjoy this tax-deferred growth due to both the life span of the account holder and the possible effect of RMDs.

For clients who are working and who are covered by a 401( k) strategy contributing to their business’s 401( k) can be a great option instead of or in addition to a traditional IRA. As long as their employer has made the correct selection for their plan and your customer is not a 5% or more owner of a business, they can delay RMDs on the cash in their company’s 401( k) as long as they are working there.

Standard Individual Retirement Account Contributions and QCDs

The ability to contribute to a standard Individual Retirement Account past age 70 & frac12; can become complex if your client utilizes certified charitable circulations (QCDs). According to market specialist Michael Kitces, under the SECURE Act any contributions made to a traditional IRA account after the age of 70 & frac12; would decrease the amount that might be utilized to make QCDs in subsequent years.

The intent of this rule under the SECURE Act was likely to avoid IRA account holders from making a pre-tax contribution to their Individual Retirement Account and after that turning around and doing a QCD and basically double-dipping on the tax benefits of both deals.

For customers who may like to do both a pre-tax Individual Retirement Account contribution and a QCD, this will make the QCD more complicated. As their advisor, it behooves you to assist them to analyze if doing both makes sense, or if they might be much better off refraining from doing the pre-tax IRA contribution in favor of being able to maximize the tax benefits of the QCD.

Roth Contributions

For older clients with earned earnings, adding to a Roth IRA versus a standard IRA may make sense. While they will not receive a present year tax advantage, the Roth contributions will not undergo RMDs and will be enabled to grow tax-free. If your client chooses to withdraw some or all of the cash in their Roth account, it will come out tax-free as long as the five-year guideline and other requirements are fulfilled.

Besides not being subject to RMDs, Roth IRAs have an additional estate planning benefit under the SECURE Act. The new rules need most non-spousal recipients to withdraw the entire account balance of an inherited IRA within 10 years of inheriting it. This includes Roth IRAs. Presuming the account holder had met the five-year guideline prior to they died, these withdrawals will be tax-free.

Keep in mind that the very same income restrictions on making a Roth contribution apply to everybody regardless of age. If your client makes too much, their capability to contribute to a Roth IRA will be minimized or eliminated entirely.


Taxes and Individual retirement accounts are constantly intertwined. For clients with earned earnings past the age of 70 & frac12; their present tax scenario compared to their anticipated tax bracket in the future will be a consideration. If they are in a high tax bracket now, the ability to make a pre-tax contribution might still be helpful.

Much of your clients may continue to work past the age of 70 & frac12; Adding to an Individual Retirement Account can be a great alternative for them.

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