IRA Deduction Eligability

Forum|Forum|5 years ago
September 10, 2020
2 replies
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Working for a private company this year is the first W2 job I have had since retirement some many years ago so it will present a sizable bump up in our income this year and perhaps in the immediate following year. Both my wife and I are retired on and collecting US Government pensions. Me OPM and her OPM and Social Security. I was investigating opening both an IRA for me (age 72) and a spousal IRA for her (age 66) for tax sheltering purposes under the 2019 changes in law. I do understand that my eligibility to DEDUCT an IRA contribution is based on our Modified Adjusted Gross Income AND whether I or my spouse is covered by a workplace retirement plan. My current employer does not have a workplace retirement plan. BUT THE PART I DO NOT UNDERSTAND IS: DO OUR RETIREMENT PENSIONS THAT WE ARE COLLECTING FALL UNDER THE DEFINITION OF "COVERED BY A WORKPLACE RETIREMENT PLAN" WITH RESPECT TO ELIGIBILITY FOR A IRA DEDUCTION AND AMOUNT?

Bsch4477

Level 15

Since your employer does not have a retirement plan you are not covered by one. You payments from your prior pension are not relevant.

Critter-3

Level 15

And starting in 2020, as long as you are still working, there is no age limit to be able to contribute to a Traditional IRA. The Secure Act, signed into law on December 20, 2019, removed the age limit in which an individual can contribute to an IRA. The top age prior to the law was 70½.

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Opus 17

Level 15

If you already have some kind of pre-tax retirement plan (pension, traditional IRA, 401(k)), then I suggest a Roth IRA. You don't get the immediate tax deduction, but future withdrawals are tax free and there is no RMD requirement.