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Investing/Strategies / Retirement Investing
|Subject: Re: AGI limits for dummies||Date: 7/10/2000 7:50 AM|
|Author: TMFPixy||Number: 23227 of 76418|
Greetings, LMally, and welcome. You asked:
<<Just to confirm that I've got this correct.
1)My husband can contribute to his company's SEP to its maximum amount and have full company matching of his contributions.
2)He can also put $2,000 of already taxed money into a non-deductible IRA that will grow tax deferred until we take out the money.>>
It depends on the type of SEP his firm offers. If it is a straight SEP-IRA to which his employer contributes something during the year, then your husband may make a contribution to that SEP or another IRA of only $2K per year. That contribution may or may not be deductible depending on your adjusted gross income for the year. If it's not deductible, then almost assuredly he should use a Roth IRA (again assuming the AGI limits are met for a Roth contribution). OTOH, if his employer has a SARSEP plan, then he may make a contribution to that plan along with his employer. His contribution by itself may not exceed an absolute dollar amount of $10.5K, but it is also limited by a percentage of his compensation. That percentage is 15% of his pay. If 15% is less than $10.5K, then your hubby will be limited to the 15% number. He may still contribute another $2K to an IRA that may or may not be deductible depending on his AGI. For details, see my Foolish Retirement Plan Primer at http://www.fool.com/Retirement/Retirement.htm.
<<3)He can set up a Spousal IRA of $2,000 for me that is a deductible IRA that will also grow tax deferred. >>
Yes, but again that depends on your joint AGI. For details, see our IRA area at http://www.fool.com/money/allaboutiras/allaboutiras.htm.
<<Please rap on wrists if I haven't been paying enough attention! However, assuming I've got this correct I've three additional questions.>>
Consider it done.
<<1) What happens if we set up the Spousal IRA and by the end of the year I have found a job? Can we change it into a deductible IRA in my own right?>>
The IRA will already be in your "own right." However, the contribution may end up being nondeductible if you participate in a retirement plan of that new employer for even one day during the year. Again, see our IRA area.
<<2) What happens if we get transferred back to the UK or another country? Can we keep these accounts open? If so, can we still add money? We got burned on our UK retirement accounts when we moved so I'm trying to be more Foolish this time!>>
You may find that some custodians won't allow any new contributions unless you have a U.S. mailing address.
<<3) I've been doing some Foolish research and thought about setting one of the IRAs up with the Vanguard S&P 500 index (VFINX) or Vanguard Wiltshire 5000 index (VTSMX) and the other as Vanguard Health Care (VGHCX). Looks like I've got the Vanguard fetish!! Could I buy a mixture of the stock index funds (QQQs, DIA's and SPYs) instead and would this have any benefits/drawbacks? Also, should I consider a non-US fund to balance risk? Any other suggestions on how we invest the money? We have at least 15years before retirement. >>
That's a personal decision I'll leave entirely to you.
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