IRA contribution for non-working DW?

[Bimmerbill]

Can I contribute to an IRA for my non-working DW?

 

[gindie]

Yes, as long as you have enough earned income to cover the contributions.

 

[Martha]

To add to what Gindie said, if only one spouse if covered by a retirement plan at work, joint filers may be able to deduct spousal IRA contributions as the income phase out is pretty high for a spousal IRA deduction(150,000 to 160,000 income phase out for 2006 and it may be up to 156,000 to 166,000 AGI phase out for 2007 if the same phase outs apply to the spousal IRA as to a ROTH).

 

[simple girl]

If you do qualify for the traditional IRA for a spouse, how you determine whether it is better to go traditional IRA and take the tax deduction now, vs. doing a Roth IRA and not having to pay taxes later?

I know this is a basic question, as most people say it depends on what your tax bracket will be when retired. ie. if you will be in a higher tax bracket when retired, go for the Roth. Since we plan to live on less on our current income when retired, I presume we will be in a lower tax bracket. Anyone have a link to current tax brackets?

 

[Martha]

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

2007 tax brackets


Exemptions and standard deductions for 2007: http://www.irs.gov/newsroom/article/0,,id=150172,00.html

 

[Bimmerbill]

Hmm, interesting. I thought DW needed earned income.
Another question: the Vanguard funds require $3K minimum investment. Is that PER fund, or total investment? If I put $4K into a Roth, can I choose several mutual funds, or only 1 due to the $3K min?

 

[ats5g]

Hmm, interesting. I thought DW needed earned income.
Another question: the Vanguard funds require $3K minimum investment. Is that PER fund, or total investment? If I put $4K into a Roth, can I choose several mutual funds, or only 1 due to the $3K min?

Most Vanguard funds require the initial $3000 start up, except Vanguard STAR, which only requires $1000. Also note that most Vanguard funds will sock you with $10 for each fund in your IRA with balances below $5,000, though this fee may not apply if the IRA owner’s Vanguard account assets (including IRAs, employer-sponsored plans, brokerage accounts, annuities, and nonretirement accounts) total $50,000 or more.

Plus, most index funds, except REIT index fund, will sock you with a $10 charge if your balance in that fund is below $10,000.

- Alec

 

[Nords]

Hmm, interesting. I thought DW needed earned income.
Another question: the Vanguard funds require $3K minimum investment. Is that PER fund, or total investment? If I put $4K into a Roth, can I choose several mutual funds, or only 1 due to the $3K min?

Nope, only one spouse needs earned income for both spouses to have contributions. Of course once your money goes into her account, it's hers forever.

Keep in mind that from now until 15 April you can send Vanguard one check that could include contributions from 2006 and 2007. That's how our kid can get up to the T. Rowe Price minimum investment.