Question: Clyde in Oxford: I just turned 71 and I work part time, so I have extra “fun money”. Even though I am over 70 ½, can I still continue to contribute to the IRA? And will I get a tax deduction?
A: The answer to the first part of your question is “yes” thanks to the SECURE Law of 2019. Prior to the adoption of this law, anyone over the age of 70 or older could not contribute to a traditional IRA (because that age required a minimum allocation, or RMD- these, introduced into the game). However, the SECURE Act not only increased the starting age of RMDs to 72, but now allows anyone aged 72 or over to continue contributing to an IRA – as long as they have ‘earned income’.
And this change makes sense on a practical level. According to Morningstar, 20% of people over the age of 65 worked (or looked for work) in 2019. That’s almost twice as many as in 1985. So as people work longer, it’s fair to be allowed more flexibility with their retirement accounts.
In 2021, you can contribute up to $ 7,000 to the IRA ($ 6,000 for anyone under the age of 50) if you have at least 7,000 earned income. (If your income is less than this, you can contribute as much as you earn.)
As for whether you will receive tax relief, it depends on whether you are currently participating in a qualified retirement account or not (such as 401 (k)). If you do not participate, you can refuse the full amount of the IRA contribution. If you do so, your modified adjusted gross income (MAGI) must be $ 66,000 or less to deduct your full contribution (assuming you are a single taxpayer). Deductions then begin to be phased out and cannot be deducted at all when an individual’s MAGI reaches $ 76,000.
Here’s an Allworth tip: The rules have changed for older workers, so feel free to take advantage! But also keep in mind that there may be other types of accounts that best suit your needs – like taxable brokerage accounts or even Roth IRAs.
Q: Tracy in Warren County: My husband and I are trying to decide who to appoint as our executor. We have in mind a few family members and even a few friends. Do you have any suggestions for making this decision?
A: He jokingly says, “Very carefully.” Being a property executor is a huge task – and the role only gets more complicated with the size of the property. This person will deal with everything from settling bills, paying off your debts, submitting your will and communicating with your customers. For starters, take a look at your list of candidates. If someone is not organized and focused on the details, they should get off that list. The same if you don’t consider them honest and responsible.
Similarly, consider the temperament of the people you have in mind. It is best for the one you choose to be patient, because the legacy process can be long and sometimes challenging. You also want someone who won’t hesitate to invest extra work if necessary – and if necessary to use ‘hard love’. Age is also an important factor. Consider choosing someone younger than you and your spouse (because they obviously need to outlive you).
Allworth’s advice is that once you decide who you want to choose, have an official conversation with them. Ask if they are willing to participate in this role and if they are, discuss their expectations. And, because they might turn you down, keep a backup in mind as well.
Every week Amy Wagner and Steve Sprovach, Allworth Financial, answer your questions. If you, a friend or someone in your family has a financial difficulty or problem, feel free to send these questions to yourmoney@enquirer.com.
The responses are for informational purposes only, and individuals should consider whether any general recommendation in those responses is appropriate to their particular circumstances based on investment objectives, financial situation, and needs. To the extent that the reader has any questions regarding the applicability of any of the above issues to his / her individual situation, he or she is encouraged to consult with a professional advisor of his or her choice, including a tax advisor and / or attorney. Retirement planning services provided by Allworth Financial, SEC Investment Advisor. Securities offered through AW Securities, a registered broker / dealer, member of FINRA / SIPC. Call 513-469-7500 or visit allworthfinancial.com
