Join Early Retirement Today
Reply
 
Thread Tools Display Modes
401k Plan and Spousal IRA Question
Old 10-27-2005, 10:12 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,654
401k Plan and Spousal IRA Question

I have done a small amount of contract work this year, I have maxed out my 401k. Does anyone know if I can open a spousal IRA for my wife and get the full deduction? ($4000 I think).

I cannot find much on this. I can find articles that talk about having and IRA then getting a spousal IRA for the spouse, but not in conjunction with a 401k.

Thanks

SWR
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
ShokWaveRider is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: 401k Plan and Spousal IRA Question
Old 10-27-2005, 10:24 AM   #2
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
Re: 401k Plan and Spousal IRA Question

You have to file a joint tax return. If only one spouse is covered by a 401(k), then then the other spouse can have a traditional IRA. Full deductibility for AGI less than $150,000; partial deductibility for AGI of $150,000-$160,000. If you are looking at a ROTH, the AGI limitations are the same.

For 2005, IRA max for an individual is $4000, plus an extra $500 if over 50.

EDIT: I should provide you a source; the applicable IRS publication: http://www.irs.gov/publications/p590/
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: 401k Plan and Spousal IRA Question
Old 10-27-2005, 01:22 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,654
Re: 401k Plan and Spousal IRA Question

Quote:
Originally Posted by Martha
You have to file a joint tax return. If only one spouse is covered by a 401(k), then then the other spouse can have a traditional IRA. Full deductibility for AGI less than $150,000; partial deductibility for AGI of $150,000-$160,000. If you are looking at a ROTH, the AGI limitations are the same.

For 2005, IRA max for an individual is $4000, plus an extra $500 if over 50.

EDIT: I should provide you a source; the applicable IRS publication: http://www.irs.gov/publications/p590/
Thanks Matha. Just what I needed. I was unsure of the 401k relationship. It is all clear now I think. I assume when they refer to an Employer Retirement Plan they are NOT referrring to a 401K

" If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status."

SWR
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
ShokWaveRider is offline   Reply With Quote
Re: 401k Plan and Spousal IRA Question
Old 10-27-2005, 01:34 PM   #4
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
Re: 401k Plan and Spousal IRA Question

Quote:
Originally Posted by ShokWaveRider
Thanks Matha. Just what I needed. I was unsure of the 401k relationship. It is all clear now I think. I assume when they refer to an Employer Retirement Plan they are NOT referrring to a 401K

" If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status."

SWR
Look at table 1-3 in the publication, which gives the answer I gave in my first post. . A 401(k) is in fact an employer retirement plan, but because your spouse is not covered by that plan, she can contribute to a fully deductible IRA if your family's AGI is not above the $150,000 I mentioned above. The deduction is phased out between AGI of $150,000 and $160,000. If you weren't covered by a 401(k), then there would be no AGI limits.

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: 401k Plan and Spousal IRA Question
Old 10-27-2005, 06:20 PM   #5
Full time employment: Posting here.
 
Join Date: Sep 2004
Posts: 607
Re: 401k Plan and Spousal IRA Question

Quote:
Originally Posted by Martha
You have to file a joint tax return. If only one spouse is covered by a 401(k), then then the other spouse can have a traditional IRA. Full deductibility for AGI less than $150,000; partial deductibility for AGI of $150,000-$160,000. If you are looking at a ROTH, the AGI limitations are the same.
Hmm, Did I read this right? I have a 401(k), wife does not (although she does have a 403(b) and a 457). Are you saying that we can open up a traditional IRA for her that would be fully deductible if our AGI was < $150k? I'm aware of the AGI limits for the Roth (150k) and that's what we've been doing...but I had no idea that the AGI limits for deductibility for traditional was so high. Did this change recently?
WanderALot is offline   Reply With Quote
Re: 401k Plan and Spousal IRA Question
Old 10-27-2005, 10:24 PM   #6
Dryer sheet aficionado
 
Join Date: Jan 2005
Posts: 46
Re: 401k Plan and Spousal IRA Question

Is your wife contributing to her 403(b)? If so, then your best bet is to go with a Roth IRA because it isn't likely that you would qualify for a fully deductible Traditional IRA since you cannot have a Modified AGI of $75,000 or more. You can still contribute to the IRA (as long as your MAGI is less than $150,000, phased out up to $160,000), it just won't be deductible. In that case, a Roth is the better choice.

I hope this was clear and helpful.
JLP is offline   Reply With Quote
Re: 401k Plan and Spousal IRA Question
Old 10-28-2005, 08:10 AM   #7
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
Re: 401k Plan and Spousal IRA Question

Quote:
Originally Posted by WanderALot
Hmm, Did I read this right? I have a 401(k), wife does not (although she does have a 403(b) and a 457). Are you saying that we can open up a traditional IRA for her that would be fully deductible if our AGI was < $150k? I'm aware of the AGI limits for the Roth (150k) and that's what we've been doing...but I had no idea that the AGI limits for deductibility for traditional was so high. Did this change recently?
My answer only applied to Shock, who's wife did not have a retirement plan. Because your wife is covered by a plan, the income limits are much smaller for a deductible IRA. You are probably better off with a ROTH, if your joint AGI is less than $150,000-$160,000. The publication I linked to in my first post also answers the questions of how much you can contribute to IRAs if you are both covered by retirement plans at work, whether a 401(k), 403(b) or 457 plan.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Reply

Tags
401k, ira


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
500 search phrases for 2006 dory36 Other topics 2 01-16-2007 07:00 AM
IRA Question vallieone FIRE and Money 9 11-19-2003 09:43 AM

» Quick Links

 
All times are GMT -6. The time now is 10:37 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.