UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Author: Bob721 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Can I contribute to a Traditional IRA Date: 3/11/2002 12:18 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Are my wife and I eligible to contribute to a Traditonal IRA? I realize that it is not deductable, but I still would like to contribute.

My accountant is unsure because of several factors:

My wife an I have an AGI of over $160k

Prior to leaving her employer in March, 2001, my wife contributed to a 401k

She than worked as an independent contractor for her ex-employer and established a SIMPLE IRA

She then started her own corp, and we both contributed to SIMPLE IRA's (for a total of three SIMPLE IRA's)

Through my employer, I participate in a pension plan, and also contributed to a 401k and 457

Thanks in advance for your help!!
Print the post Back To Top
Author: jgenduso1 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33966 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 12:40 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I believe you can, you just can't deduct it from your taxes.

In 2001 my AGI was over the max for both Roth and regular IRA. But I was able to put 2K into a traditional IRA but not deduct it from my taxes.

Hope this helps,

Joseph

Print the post Back To Top
Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33967 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 12:43 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Are my wife and I eligible to contribute to a Traditonal IRA? I realize that it is not deductable, but I still would like to contribute.

My accountant is unsure because of several factors:

My wife an I have an AGI of over $160k

Prior to leaving her employer in March, 2001, my wife contributed to a 401k

She than worked as an independent contractor for her ex-employer and established a SIMPLE IRA

She then started her own corp, and we both contributed to SIMPLE IRA's (for a total of three SIMPLE IRA's)

Through my employer, I participate in a pension plan, and also contributed to a 401k and 457

Yes, I believe you can. A traditional IRA is available to almost anyone. The income limits along with the 401k contributions makes it non-deductible. The SIMPLE is also considered an employer sponsored retirement plan and doesn't take away the IRA. The 457 plan doesn't affect it at all.

Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33968 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 12:53 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
Greetings, Bob721, and welcome. You asked:

Are my wife and I eligible to contribute to a Traditonal IRA? I realize that it is not deductable, but I still would like to contribute.

My accountant is unsure because of several factors:

My wife an I have an AGI of over $160k

Prior to leaving her employer in March, 2001, my wife contributed to a 401k

She than worked as an independent contractor for her ex-employer and established a SIMPLE IRA

She then started her own corp, and we both contributed to SIMPLE IRA's (for a total of three SIMPLE IRA's)

Through my employer, I participate in a pension plan, and also contributed to a 401k and 457


Based on your income and your participation in various retirement plan vehicles, you both are ineligible to make a deductible contributon to a traditional IRA. However, assuming you are both younger than age 70 1/2, then you both may make a nondeductible contribution to a traditional IRA. Arguably, making a nondeductible contribution to a Roth IRA would be better, but your income is too high to permit a contribution to a Roth. However, as long as you have earned compensation from work and remain under the age of 70 1/2, you may always make a nondeductible contribution to a traditional IRA.

Before you do that, though, think of the type of investment you will make. If you will make a long-term, buy-and-hold investment in a growth vehicle like stocks, then you quite possibly may be better off investing your money in a taxable account under today's tax laws. Remember -- Any gain in a traditional IRA will be taxed at ordinary income tax rates in the year you begin withdrawals. Those rates will be higher than a long-term capital gains rate applicable to any gain in a taxable account in any tax bracket you may find yourself at the time of withdrawal.

Regards..Pixy


Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: Bob721 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33969 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 2:51 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Thanks to everyone for the rapid replies.

Problem solved - It makes a lot of sense to put a long term investment in a taxable account, rather than a traditional IRA.

However I do have another question: In early 2001, we put $4,000 in Roth IRA's, buying shares of the Nasdaq 100 (QQQ's). Beacause our AGI was much higher than we estimated, we need to sell the shares and withdraw the funds, which is now worth about $2,800 (ouch!)

My accountant does not believe that I can claim a loss on the sale of the shares. Is this accurate???



Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33970 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 3:09 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Bob721 asks:

However I do have another question: In early 2001, we put $4,000 in Roth IRA's, buying shares of the Nasdaq 100 (QQQ's). Beacause our AGI was much higher than we estimated, we need to sell the shares and withdraw the funds, which is now worth about $2,800 (ouch!)

My accountant does not believe that I can claim a loss on the sale of the shares. Is this accurate???


Your accountant needs to learn a little more about IRAs. He/she should have known you could contribute to a nondeductible traditional IRA, and he/she should also know that when you have a basis in your IRAs, it may be possible to claim a loss on that basis when the IRAs are liquidated. You -- and definitely he/she -- should read pages 32 and 59 of IRS Publication 590 (Individual Retirement Arrangements) available for download at http://www.irs.ustreas.gov/forms_pubs/pubs.html.

In your case, all the nondeductible contributions you made to all of your Roth IRAs constitute your basis. If you cash in all of your Roth IRAs and have a loss based on those contributions, then the loss may be claimed as an itemized deduction in the Miscellaneous section of Schedule A of your Form 1040. To the extent that loss exceeds 2% of your adjusted gross income, it will serve to reduce your taxable income and your income taxes due.

Regards..Pixy


Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33972 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/11/2002 8:38 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
However I do have another question: In early 2001, we put $4,000 in Roth IRA's, buying shares of the Nasdaq 100 (QQQ's). Beacause our AGI was much higher than we estimated, we need to sell the shares and withdraw the funds, which is now worth about $2,800 (ouch!)

If you decide to go the non-deductible traditional IRA route instead of the Roth, you may simply recharacterize the Roth contributions as traditional contributions. It may not be necessary to sell the underlying investment, depending on your custodian's requirements.

--Peter

Print the post Back To Top
Author: bagginses One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33973 of 76418
Subject: Re: Can I contribute to a Traditional IRA Date: 3/12/2002 10:17 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 5
Bob, you might want to step back and take an honest, objective look at your accountant. If that person were my accountant, I would be concerned. Inasmuch as he/she didn't know the answer to your fundamental IRA question -- or couldn't at least find out <i/> the answer -- what else might he/she not know?

As usual, this is just my $0.02. Good luck.

Bagginses

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev Thread | Next Thread
Advertisement