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Author: tresarivers Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75523  
Subject: 401k spouse question Date: 8/28/2000 2:19 PM
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Does the 401k have the ability to add additional funds for the purpose of saving for retirement for a non-working spouse, like the IRA does?

If not, any suggestions? We are newly in the position of needing to tax-shelter our income, as my husbands salary has increased quite a bit recently.

Thanks!
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24412 of 75523
Subject: Re: 401k spouse question Date: 8/28/2000 2:31 PM
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Greetings, Tresarivers, and welcome. You asked:

<<Does the 401k have the ability to add additional funds for the purpose of saving for retirement for a non-working spouse, like the IRA does?

If not, any suggestions? We are newly in the position of needing to tax-shelter our income, as my husbands salary has increased quite a bit recently.>>


No, there is no spousal contribution for a 401k plan. That exists only for an IRA when one spouse doesn't work. Your only other option for doing something on a tax deferred basis beyond the IRA is to use an annuity, which is NOT a good idea for most folks. To see why, see the annuity series at http://www.fool.com/retirement/annuities/annuities01.htm?ref=G02C04.

FWIW, there really is nothing wrong with paying taxes when you must. Indeed, often using a fully taxable account in a long-term, buy and hold strategy, will result in a greater after-tax stash than an IRA or 401k. So if you've used up your IRA for the unemployed spouse, then use a taxable account. It's perfectly permissible and often Foolish to do so.

Regards..Pixy

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Author: djharker One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24413 of 75523
Subject: Re: 401k spouse question Date: 8/28/2000 2:34 PM
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>Does the 401k have the ability to add additional
>funds for the purpose of saving for retirement
>for a non-working spouse, like the IRA does?

No. The limit on annual 401k investment is based on
IRS codes and the amount of participation in the
401k plan at your husband's company. It is set
(based on those factors) by the company.
That same limit applies to all employees, whether
single or married.

Your husband should "max out" his 401k investment.
The 401k will automatically become yours if your
husband dies before you do (this is part of the
IRS code - ie, a law - you WILL get it - and can
roll it into an IRA at that time).

After maxing out your husband's 401k, you can still save $2000 each in IRAs - each of you can open an
IRA account for yourselves, preferably at a
discount broker, or Vanguard (my prefs).

After you have done that, continue to save (if
you have more $$) in a normal, taxable brokerage
account or mutual funds (if you want to retire
as soon as posssible...)

best of luck...





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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24414 of 75523
Subject: Re: 401k spouse question Date: 8/28/2000 2:39 PM
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DJ--you say "After maxing out your husband's 401k, you can still save $2000 each in IRAs ."

You mean a ROTH, right? It was my understanding that after a certain income level, one cannot contribute to a standard IRA.

I'm puzzled.

elizabeth

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24415 of 75523
Subject: Re: 401k spouse question Date: 8/28/2000 2:57 PM
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Greetings, Elizabeth, and welcome. You asked:

<<You mean a ROTH, right? It was my understanding that after a certain income level, one cannot contribute to a standard IRA.

I'm puzzled.>>


It can be to either depending on income and filing status. See our IRA area at http://www.fool.com/money/allaboutiras/allaboutiras.htm for details. As long as one spouse has earned income and the person owning the IRA is under age 70 1/2, then one may ALWAYS make a nondeductible contribution to a traditional IRA. Contributions to a deductible traditional IRA are limited by adjusted gross income for those covered by a retirement plan through work. A nondeductible contribution to a Roth IRA is not allowed above certain levels of adjusted gross income. Those limiting factors are explained in out IRA area.

Regards..Pixy

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