This is because RMDs require you to withdraw only part of these accounts. By contributing to your IRA, you're effectively replenishing your retirement savings. If you can deduct the IRA contribution, you'll also offset part of the tax impact of accepting RMD. Additionally, investing in an IRA in Gold may be a wise choice for those looking to diversify their retirement portfolio.
The short answer is that additional contributions to traditional IRA after the age of RMD, including IRA in Gold, may make sense in a handful of situations, but not in many. Roth IRAs don't require RMD withdrawals until after the owner dies. If you have a Roth account in an employer-sponsored plan, the IRS recommends that you contact the sponsor or plan administrator for information on the RMD. Do not use Form 8606, Non-Deductible IRAs (PDF/PDF, Non-Deductible IRAs) to declare non-deductible contributions to a Roth IRA. Jeffrey Levine, an expert in tax and financial planning, described traditional IRA contributions after the RMD era as something like a revolving door of IRA money.
In the case of Roth contributions, they will benefit from tax-free capitalization in the years leading up to retirement and will also be able to withdraw tax-free funds from the account when they retire. Leveraging IRAs to save later in life has tax benefits and will often be preferable to investing in a taxable brokerage account for older adults with earned incomes, but those tax benefits will tend to be modest. IRA investments in other unconventional assets, such as limited liability companies and real estate, risk disqualifying the IRA due to prohibited transaction rules that prohibit self-trading. To recharacterize a regular contribution to an IRA, you ask the administrator of the financial institution holding your IRA to transfer the amount of the contribution plus earnings to a different type of IRA (either a Roth or traditional one) through a transfer from trustee to trustee or to a different type of IRA with the same trustee.
However, such a maneuver will entail tax costs in the (probable) scenario where a retiree has significant traditional IRA assets that have not yet been taxed. In general, a qualified charitable distribution is a taxable distribution of an IRA (other than an ongoing SEP or SIMPLE IRA) owned by a person aged 70 and a half or older and that is paid directly from the IRA to a qualified charity. However, there is an important caveat in the sense that the proportional rule affects conversion taxes, and many older adults have significant traditional IRA assets. Traditional IRA contributions later in life can also make sense if the person earns too much to contribute directly to a Roth IRA; in that case, the taxpayer can take advantage of the clandestine Roth IRA maneuver, fund the traditional IRA, and then convert it to Roth.
The only divorce-related exception for IRAs is if you transfer your interest in the IRA to a spouse or former spouse and the transfer is made under an instrument of divorce or separation (see section 408 (d) () of the IRC. The contribution limits for traditional IRA contributions that you can deduct on your tax return are the strictest; Roth IRA contributions are allowed with a higher income limit. See publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more information on IRA losses.
