Workers over 72 have the ability to save and defer taxes through Roth IRAs and qualified plans. By incorporating these and other tools into their overall strategy, people who are about to retire can legitimately reduce their overall tax burden. Before investing, carefully consider the fund's investment objectives, risks, and charges and expenses, including management fees, other expenses and special risks. A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.
Keep in mind that those who are 70 and a half years old or older and make contributions to a traditional IRA, a SIMPLE IRA, or an SEP IRA will continue to have to apply for an RMD, even if they are still working. A traditional IRA allows investors to make contributions, and you receive a tax deduction equal to the amount of the contribution in the tax year in which you made it. If that same person owns less than 5% of the business and is still working for the company (and the plan administrator allows it), they could transfer any existing IRA and retirement plan to their current employer's plan. Although it depends on the state in which you live and file your taxes, some states that impose a state income tax offer more favorable tax treatment to people who make contributions to and receive distributions from IRAs and other qualified plans.
As already mentioned, there is no age restriction for opening or making contributions to Roth and traditional IRAs. If you only work part time and meet certain eligibility requirements, a Roth IRA may be a great option. You should start withdrawing the required minimum distribution (RMD) from your tax-deferred retirement accounts, such as a traditional IRA or 401 (k) plan, when you turn 72.You can continue to contribute indefinitely, and because Roth IRAs are not subject to RMDs, your savings can accumulate tax-free for longer. If you or your spouse contribute to an employer's retirement plan, you may not be allowed to deduct part or all of your contribution to a traditional IRA.
Under the new SECURE Act, if you have earned income, there is no age limit for contributing to a traditional IRA (previously, you had to stop doing so the year you were 70 and a half years old). 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. In the past, if you were over 70 and a half years old, you would lose the ability to contribute to a traditional IRA. Many people who work into their 70s have several IRAs and other types of retirement plans.
