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ginfish wrote:

this is my first post since I am A new Fool and a new to investing. Do not want IRA. My wife 56 years old. Annuity from forced retirement United Airlines from Met Life + $5000 earings part time job. Federal tax taken from annuity. Me, 55 years old, on 100% disability compensation (not pension)from veterans admin. No federal tax deducted on payment but tax due on filing income tax at end of year. Am I eligible for anything? we have more than enough $$ to support ourselves with the monthly payments. Thanks Eddie

I reply:

Since your wife has $5,000 in earnings from her part time job and that is the total amount of earned compensation between you, you may invest up to that actual amount(from W2) between the two of you for your combined IRAs, no more than $3500 for each person for 2004.

Unless you wife was a top executive at United, your Modified AGI should be below the $150,000 lower limit which would otherwise allow each of you to add up to a full $3500 to a Roth. If you are in between $150,000 and 160,000 in MAGI you would have to refer to the worksheets in Pub 590 Individual Retirement Arrangments available at
Since neither of you is employed this year by an employer with an active retirement plan, you should both be eligible for a fully deductible traditional IRA.

Another tax break available to many taxpayers of modest means who are able to contribute to IRAs is the Retirement Savings Tax Credit. It may be better for some taxpayers to fine tune contributions beween traditional deductible and Roth IRAs to get maximum deferral for least tax.

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