IRA contribution over 70 year old. Neat idea or illegal?ProSeries
IRA contribution for over 70 year old is treated as non-deductible IRA and also subject to 6% penalty. But if otherwise eligible (still working), the tax savings is still significant. So the penalty is 6% but they save 15% on contribution because it reduces IRA withdrawal in current year by the amount of non-deductible contribution. Of course this also results in less SS taxed in certain cases because AGI is reduced. The only restriction I can find is they have to do it in the calendar year. If done in following year before 4/15 then non-deductible IRA basis cannot be used to offset IRA distribution in 2011.
Or am I missing something?