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Hi all,

I need help with divising a retirement plan for my wife. She works, but doesn't have the benefit of a 401K or any other kind of tax sheltered retirement vehicle. What should I do to help her setup a retirement account? We've considered IRAs, but with the max limit of $2500 for the most part, makes it kinda useless since she can contribute more than that over the course of a year. We'd like to avoid the tax monster as much as possible, but don't want to make it difficult to contribute as much as she possibly can. Any advice would be much appreciated.

Thanks!

Killroy
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The ira max. at this time is $2000.
If she does not work where they offer a 401k or the like, than this would be the way to go to start for retirment. (and is not self employeed)
The extra money leftover would then need to go into a taxable account.
It may be that the ira max might go up to $5000 in the future, but that remains to be seen as of yet.
In a taxable account you could look into tax effeicent funds in order to reduce your tax burden.
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Killroy,

Both you and your wife can have an IRA. The limit for contributions to an IRA is now $2000 a year. So using IRAs you and you wife combined can put $4000 in tax-shelterer accounts.

Many mutual fund companies will be able to take the investments out of your checking account each month and direct it to the proper accounts (IRA or taxable). This would reduce the hassle of investing.
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opening 2 IRA's (one in your name, one in hers) would allow you to contribute $4000 per year...$2000 to each.

Roth IRA contributions are not tax deductable, but allow tax free qualified withdrawls at retirement.

Also, having a 401(k) doesnt exclude you from contributing to a Roth IRA.

some links with more info:

http://www.fairmark.com/rothira/

http://www.fool.com/money/allaboutiras/allaboutiras.htm

hope this helps!

'zila
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One item that hasn't been mentioned yet, is tax issues at retirement.

Income from IRA's are taxed at the regular income tax rate of 15%,20%, 28%, etc. depending on how much you withdraw every year.

If you invest in stocks and hold them for more than five years, the capital gains tax rate drops to 10%. This is less than the income tax rate.

Just another thought.
Tony
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tfranklin: "One item that hasn't been mentioned yet, is tax issues at retirement.

Income from IRA's are taxed at the regular income tax rate of 15%,20%, 28%, etc. depending on how much you withdraw every year.

If you invest in stocks and hold them for more than five years, the capital gains tax rate drops to 10%."


This is not entirely accurate, and two concepts have been mixed together.

First, tfranklin is correct when he writes "Income from IRA's are taxed at the regular income tax rate of 15%, 20%, 28%, etc. depending on how much you withdraw every year," - the normal income tax rates, like all other income, assuming that we are discussing traditional IRAs and not Roth IRAs.

If you invest invest in stocks and hold them for more than one year plus 1 day, then the gains (but not any dividends) are taxed at long-term capital gains rates, 10% (if otherwise in the 15% bracket, at least until it is full) or 20%.

There is now a super long-term capital gains rate for gains from capital assets held more than 5 years -- if the LTCG rate would have been 20%, the super LTCG rate will be 18%, if the LTCG rate would have been 10%, the super LTCG rate will be 8% (IIRC, possibly 9%) --- but only until 15% bracket is full.

Hope this helps. I suspect that TMFTaxes has an article somewhere int eh archives, and the resident pros on the Tax board could expound more if need be.

Regards, JAFO



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