Roth IRAs aren’t subject to RMD rules, but Roth 401 (k) is, unless you’re still employed by the company sponsoring the plan. However, a related provision that has received less attention allows account holders to continue to contribute to traditional IRAs even after the age of 72, as long as they have earned an income. She wants to set aside some money for her retirement. However, she has no access to a company pension scheme. If specific advice is required or appropriate, consult a qualified tax advisor, auditor, financial planner, or investment manager.
If you can’t deduct contributions to a traditional IRA, it may make more sense to make contributions to a Roth, provided you fall below the income limits. Note, however, that unlike Roth IRAs, these plans have RMDs if you’re not working (in accordance with the age limits above). Young accumulators, for example, have many years to benefit from the tax accrual of their money. After all, working part-time not only provides a certain amount of additional income, but is also a way to stay active and engaged.
Such a maneuver, however, will involve tax costs in the (likely) scenario that a pensioner has significant traditional IRA assets that have never been taxed before. In essence, removing the age requirement for traditional IRAs brings accounts in line with the other key account types. Active participation in a retirement plan can have an impact on whether a traditional IRA contribution is tax deductible. In addition, unlike IRAs, there are no income limits for contributions to company retirement provision.
If you only work part time and meet certain eligibility requirements, a Roth IRA may be a good option. Until now, you were only allowed to make regular contributions if you had not yet reached the age of 70½ in the year in which you made the contribution. Although taxable accounts are not tax-deductible like traditional IRAs, are not tax-deferred and do not offer the potential for tax-free income like Roth, taxable accounts are eligible for long-term capital gains rates of 0 to 20 percent, which may be below normal income tax rates.
