Does anyone yet know if I turned 70.5 during 2019 will the new SECURE rules allow IRA contribution and deduction for 2019?

[hpkatz1]

ie will it be retroactive for 2019

[DoninGA]

You can't make regular contributions to a traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

IRS website - https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...

[macuser_22]

According to the text of the SECURE ACT, that provision will be effective for the tax year that starts after Dec, 31, 2019 - therefore it will not apply to 2019.

SEC. 107. Repeal of maximum age for traditional IRA contributions.

(a) In general.—Paragraph (1) of section 219(d) of the Internal Revenue Code of 1986 is repealed.

(b) Coordination with qualified charitable distributions.—Add at the end of section 408(d)(8)(A) of such Code the following:“The amount of distributions not includible in gross income by reason of the preceding sentence for a taxable year (determined without regard to this sentence) shall be reduced (but not below zero) by an amount equal to the excess of—

“(i) the aggregate amount of deductions allowed to the taxpayer under section 219 for all taxable years ending on or after the date the taxpayer attains age 70½, over

“(ii) the aggregate amount of reductions under this sentence for all taxable years preceding the current taxable year.”.

(c) Conforming amendment.—Subsection (c) of section 408A of the Internal Revenue Code of 1986 is amended by striking paragraph (4) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively.

(d) Effective date.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section shall apply to contributions made for taxable years beginning after December 31, 2019.

(2) SUBSECTION (b).—The amendment made by subsection (b) shall apply to distributions made for taxable years beginning after December 31, 2019.

[macuser_22]

@DoninGA  - The OP is referring to the SECURE act that President Trump signed into law yesterday (Friday Dec 20).  There will be many changes to retirement plans.  AFAIK this will start on 2020.

https://www.congress.gov/bill/116th-congress/house-bill/1994/text#toc-H0D097832D8054F0F85D6333B2B6E2...

[DoninGA]

@macuser_22  Thanks!!

[macuser_22]

This Kiplinger article gives an overview without all the legalize of the law text.

https://www.kiplinger.com/slideshow/retirement/T047-S001-how-the-secure-act-will-impact-retirement-s...

[dmertz]

However, as I read the newly enacted tax law changes, the Required Beginning Date for RMDs is unchanged for those who will have reached age 70½ before 2020, so someone who will have reached age 70½ by the end of 2019 must take their first RMD by April 1, 2020.  Although you may be able to make traditional contributions for years up until the one where you reach age 72, you'll still have to take RMDs.

[macuser_22]

The way I read it (and  Kiplinger seems to interpret it) is after 2019 there is no age limit to make Traditional IRA contributions at all as long as you have taxable compensation  to support the contribution.   Therefore, if your RMD is $10,000, for example, and you have taxable compensation, you could make a $7,000 IRA contribution in January, earn gains (hopefully) all year and then take a $10,000 RMD in December which would result in a net reduction in IRA value of $3,000 (or less if there were gains).   (It's somewhat equivalent to reducing the RMD amount to $3,000 rather then $10,000 although the $10,000 RMD would still be required.)

(I personally (or rather my wife) can take advantage to that since she works part time on a W-2 and has to take RMDs.   Putting much of her pay into the IRA would be advantages.)

[Anonymous_]

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@macuser_22 wrote:

The way I read it (and  Kiplinger seems to interpret it) is after 2019 there is no age limit to make Traditional IRA contributions at all as long as you have taxable compensation  to support the contribution.  

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I agree; it appears as if they removed the 70½ limitation for contributions but did not replace it with "72".

As a result, provided there is earned income, one can make contributions regardless of age.

[dmertz]

I didn't phrase my comment that very well and it was a bit off topic.  Let me summarize:

• Someone reaching age 70½ in 2019 is not permitted to contribute to a traditional IRA for 2019.  However, age is no longer a factor in determining whether or not someone is eligible to contribute to a traditional IRA for 2020 and beyond.
• Additional information I was intending to provide:  IRA RMDs must still begin with 2019 for someone reaching age 70½ in 2019.

[jimp823]

My mother turned 70.5 in 2019, but did not/does not have a traditional IRA. With the SECURE act, can she now set up a Traditional IRA in 2020, and not have to take RMDs until she turns 72 and continue to make contributions as long as she wants?

[macuser_22]

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@jimp823 wrote:

My mother turned 70.5 in 2019, but did not/does not have a traditional IRA. With the SECURE act, can she now set up a Traditional IRA in 2020, and not have to take RMDs until she turns 72 and continue to make contributions as long as she wants?

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Yes to both questions.

[fanfare]

@jimp823 

Your mom will do much better with a self-directed taxable investment account rather than a traditional IRA.

The stock  market will come back and the gains will be Long Term capital gains, not ordinary income from an IRA.