No. of 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.

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