Question of the Month (January 2020): Retirement Plan Contributions

Posted by Mike Long, CFP®, ChFC®, CLU®

Jan 1, 2020

Harry and Emma, both age 71, file taxes as MFJ. Emma retired last year, and Harry continues to work full-time simply because he loves his job. Harry earns $75,000 annually and continues to contribute to his employer’s Section 401(k) plan. Their MAGI is $85,000. Harry has asked how much they can contribute and deduct to a traditional IRA for 2020?

  1. Contribute $0; deduct $0.
  2. Contribute $6,000; deduct $0.
  3. Contribute $14,000; deduct $7,000.
  4. Contribute $14,000; deduct $14,000.

Scroll for answer...

 

 

 

 

Correct answer: D. Contribute $14,000; deduct $14,000.

Instructor insight:

The SECURE Act passed in 2019 removes the age limit for contributions to a traditional IRA. Previously, the maximum age contributions to an IRA could be made was 70 ½ which was also the age RMDs began. Under current regulations RMDs do not need to begin until the age of 72 and there is no age limit on when contributions can be made.  This means that even if individuals are forced to withdraw funds from their IRA to satisfy their RMD, they can redeposit the funds back into that same IRA so long as they meet the other contribution requirements.

Contributions and deductions are subject to the active participation and MAGI rules. Harry has enough income to allow a $7,000 contribution and deduction for himself and a $7,000 contribution and deduction for Emma under the spousal IRA rules. While Harry is an active participant in an employer-sponsored retirement plan, their MAGI is below the applicable thresholds, thus allowing a full deduction for the contributions.

 

Topics: Practice Questions

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Last updated: December 28, 2023

This Privacy Policy describes Our policies and procedures on the collection, use and disclosure of Your information when You use the Service and tells You about Your privacy rights and how the law protects You.

We use Your Personal data to provide and improve the Service. By using the Service, You agree to the collection and use of information in accordance with this Privacy Policy. 

Our Privacy Policy may be updated periodically to reflect changes in our practices or regulatory requirements. We will notify you of any significant changes by posting the new policy on our website and updating the ‘Last updated’ date.

Interpretation and Definitions

Interpretation

The words of which the initial letter is capitalized have meanings defined under the following conditions. The following definitions shall have the same meaning regardless of whether they appear in singular or in plural.

Definitions

For the purposes of this Privacy Policy:

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Collecting and Using Your Personal Data

Types of Data Collected

Personal Data

While using Our Service, We may ask You to provide Us with certain personally identifiable information that can be used to contact or identify You. Personally identifiable information may include, but is not limited to:

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Usage Data is collected automatically when using the Service.

Usage Data may include information such as Your Device's Internet Protocol address (e.g. IP address), browser type, browser version, the pages of our Service that You visit, the time and date of Your visit, the time spent on those pages, unique device identifiers and other diagnostic data.

When You access the Service by or through a mobile device, We may collect certain information automatically, including, but not limited to, the type of mobile device You use, Your mobile device unique ID, the IP address of Your mobile device, Your mobile operating system, the type of mobile Internet browser You use, unique device identifiers and other diagnostic data.

We may also collect information that Your browser sends whenever You visit our Service or when You access the Service by or through a mobile device.

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We use Cookies and similar tracking technologies to track the activity on Our Service and store certain information. Tracking technologies used are beacons, tags, and scripts to collect and track information and to improve and analyze Our Service. The technologies We use may include:

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Cookies can be "Persistent" or "Session" Cookies. Persistent Cookies remain on Your personal computer or mobile device when You go offline, while Session Cookies are deleted as soon as You close Your web browser. Learn more about cookies on the Privacy Policies website article.

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Use of Your Personal Data

The Company may use Personal Data for the following purposes:

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We may share Your personal information in the following situations:

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Retention of Your Personal Data

The Company will retain Your Personal Data only for as long as is necessary for the purposes set out in this Privacy Policy. We will retain and use Your Personal Data to the extent necessary to comply with our legal obligations (for example, if we are required to retain your data to comply with applicable laws), resolve disputes, and enforce our legal agreements and policies.

The Company will also retain Usage Data for internal analysis purposes. Usage Data is generally retained for a shorter period of time, except when this data is used to strengthen the security or to improve the functionality of Our Service, or We are legally obligated to retain this data for longer time periods.

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Your information, including Personal Data, is processed at the Company's operating offices and in any other places where the parties involved in the processing are located. It means that this information may be transferred to — and maintained on — computers located outside of Your state, province, country or other governmental jurisdiction where the data protection laws may differ than those from Your jurisdiction.

Your consent to this Privacy Policy followed by Your submission of such information represents Your agreement to that transfer.

The Company will take all steps reasonably necessary to ensure that Your data is treated securely and in accordance with this Privacy Policy and no transfer of Your Personal Data will take place to an organization or a country unless there are adequate controls in place including the security of Your data and other personal information.

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You have the right to delete or request that We assist in deleting the Personal Data that We have collected about You.

Our Service may give You the ability to delete certain information about You from within the Service.

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Disclosure of Your Personal Data

Business Transactions

If the Company is involved in a merger, acquisition or asset sale, Your Personal Data may be transferred. We will provide notice before Your Personal Data is transferred and becomes subject to a different Privacy Policy.

Law enforcement

Under certain circumstances, the Company may be required to disclose Your Personal Data if required to do so by law or in response to valid requests by public authorities (e.g. a court or a government agency).

Other legal requirements

The Company may disclose Your Personal Data in the good faith belief that such action is necessary to:

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We prioritize the security of your personal data. We implement a variety of security measures, including encryption and access controls, to protect against unauthorized access, alteration, disclosure, or destruction of your personal information, transaction information, and data stored on our site.

The security of Your Personal Data is important to Us, but remember that no method of transmission over the Internet, or method of electronic storage is 100% secure. While We strive to use commercially acceptable means to protect Your Personal Data, We cannot guarantee its absolute security.

Children's Privacy

Our Service does not address anyone under the age of 13. We do not knowingly collect personally identifiable information from anyone under the age of 13. If You are a parent or guardian and You are aware that Your child has provided Us with Personal Data, please contact Us. If We become aware that We have collected Personal Data from anyone under the age of 13 without verification of parental consent, We take steps to remove that information from Our servers.

If We need to rely on consent as a legal basis for processing Your information and Your country requires consent from a parent, We may require Your parent's consent before We collect and use that information.

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Our Service may contain links to other websites that are not operated by Us. If You click on a third party link, You will be directed to that third party's site. We strongly advise You to review the Privacy Policy of every site You visit.

We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.

Changes to this Privacy Policy

We may update Our Privacy Policy from time to time. We will notify You of any changes by posting the new Privacy Policy on this page.

We will let You know via email and/or a prominent notice on Our Service, prior to the change becoming effective and update the "Last updated" date at the top of this Privacy Policy.

You are advised to review this Privacy Policy periodically for any changes. Changes to this Privacy Policy are effective when they are posted on this page.

Contact Us

If you have any questions about this Privacy Policy, You can contact us:

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Refund Policy

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We are confident that you will be satisfied with your learning experience. However, if you need to cancel your online course enrollment for any reason, we grant refunds within the first 15 days of purchase. The 15 day refund period begins on the date of your initial purchase.

Subsequent enrollments in courses of the same certification are not refundable. Re-enrollments, extensions and continuation packages are not refundable. The first payment of a payment plan is refundable if you are within 15 days, but subsequent payments are not refundable.

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No refunds will be granted after 15 days from the date of original purchase. No exceptions (including medical, financial, etc.) will be made. Refunds are granted to first-time students only.

Please remember, if you are having difficulties we will always endeavor to go above and beyond to help you. We want nothing more than for you to succeed.