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First, we have an IRA which resulted from a Master Retirement Plan and 401k rollover. I was wondering if we added to this if we could deduct the money from our taxes. I didn't know if we could deduct this if we were already contributing to a 401k.

Check out the immediately previous thread for information about contributing to this IRA account. For information on deductibility, read on.

Also, we were thinking about opening a Roth IRA. My husband is the only one working. Since I don't have an income, can we only contribute $2000 a year, or can we contribute $4000.

If you file a joint return and have $4,000 taxable compensation between you, you can each contribute $2,000 to some kind of IRA. If your joint AGI is under $150,000 you can both contribute to Roth IRAs.

I've also heard that you can only contribute to a Roth or a traditional, but not both.

You hear a lot of things about taxes. One can contribute to both, but ones total contribution can't exceed $2,000.

My husbands work also puts away SEP funds for him. I know that we had to open a brokerage account for these and that we handle them, but I didn't know if we could add to these, or if they had to be kept separate. I don't even know how the taxes work on these.

Once money is in a SEP IRA, it's the same as any other traditional IRA. Only the employer can make SEP contributions, but there's no tax law reason why your husband can't make a traditional IRA contribution to the same account.

The SEP contributions are tax deductible; you pay tax when you make withdrawals in retirement. Because a SEP is a retirement plan, deductibility of your traditional IRA contributions are subject to AGI phaseouts. The phaseout range is different for you and your husband.

You can check deductibility in the table on page 8 of IRS Publication 590. If one can't make a deductible traditional IRA contribution, the Roth IRA is a clear winner over a nondeductible traditional contribution, if the AGI allows a Roth contribution.

My last question has to do with our son. He is all of 8 months old, but we would really like to start putting some money away for him. I looked up things on Educational IRAs, but the contributions are very limited, and it makes it so you can't take advantage of the Hope Scholarship or Lifetime Learning Credits. It also has a lot of stipulations that I am not sure if I am willing to deal with. Are there any great suggestions for saving for a college education?

You'll probably find some on the Paying for College board.

Phil Marti
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