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Author: phalanx001 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: High Income Retirement Date: 12/17/2003 1:16 PM
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My AGI is above the 150,000 max for Roth IRAs. Moreover, I contribute the maximum to my 401(k). This effectively eliminates traditional IRAs.

Are there any available retirement vehicles that provide other tax breaks? For example, my wife is a full-time student - can I setup a sheltered Spousal IRA?
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Author: hobaby One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38234 of 76237
Subject: Re: High Income Retirement Date: 12/17/2003 1:48 PM
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The five tax-advantaged vehicles I've always heard about are:

1. Retirement plan through work
2. IRAs
3. Annuities
4. Cash Value Life Insurance
5. Municipal Bonds

Since you are crossing out one and two it seems that the other three would be your only choices. You'd need to analyze your situation to see if any of these worked because they all have their draw-backs, the two biggest being expenses and making the money in exsisable till a certian age or time frame without penalty.

As for your specific question on the spousal IRA, I think your income level would still prohibit you from contributing. If she had earned income and you filed seperate tax returns, she could contirbute to a IRA, but that doesn't seem like a likely scenario.

hobaby

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38238 of 76237
Subject: Re: High Income Retirement Date: 12/17/2003 3:13 PM
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phalanx001: "My AGI is above the 150,000 max for Roth IRAs. Moreover, I contribute the maximum to my 401(k). This effectively eliminates traditional IRAs."

Not entirely. You could still make an annual contribution to a traditional IRA, which contribution would not be deductible, but which would shelter growth tax free until withdrawal.

Unless you plan on holidng income generating assets, many believe that long-term investing in equities (that you can hold for several years, at least) is better taxwise because LT capital gains receive favorable tax treatment (and you control their recognition) and dividends receive

"Are there any available retirement vehicles that provide other tax breaks? For example, my wife is a full-time student - can I setup a sheltered Spousal IRA?"

I believe that you could open a traditioanl IRA for your wife and that the annual contribution would be deductible, but please confirm the deductibility with your tax advisor. Because of your AGI, I do not beieve that she couldhave a Roth IRA.

Regards, JAFO




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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38239 of 76237
Subject: Re: High Income Retirement Date: 12/17/2003 4:35 PM
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Are there any available retirement vehicles that provide other tax breaks?

Yep. Long term buy and hold in good solid growth stocks, using after tax dollars in taxable portfolio.

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38242 of 76237
Subject: Re: High Income Retirement Date: 12/17/2003 8:12 PM
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One thing that I will personally be looking into is the new Healthcare Savings Accounts (HSA's). I read an article about it in the Wall Street Journal.

They allow a tax-deductible (i.e. pre-tax) contribution that is also tax-free when withdrawn if used for medical expenses. You can use it for medical expenses at any time, not just when you get to retirement age. If you withdraw from it before 65 and don't use it for healthcare expenses, you get hit with a 10% penalty and tax on the withdrawal. After you hit 65, you can withdraw the money for non-medical reasons without a penalty, but you will pay tax on the withdrawal.

That's the gist of it. It begins in 2004. There are some complicating factors though, like you have to have a high-deductible on health insurance and things like that.

It's worth looking into.

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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38251 of 76237
Subject: Re: High Income Retirement Date: 12/19/2003 12:08 AM
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The max for Roth's is actually $160,000 I believe. You get to contribute a percentage of the $3000 max between $150k-160k. See IRS publication 590 for details.

You can set up a spousal IRA that will grow tax deferred but no deduction...(you can set one up for both you and your wife actually)

Many don't like this strategy and there is an argument to be made for just using a long term buy and hold (LTBH) strategy in a low cost, no load mutual fund.

Personally, if your time horizon is long then I'd go for DCA'ing into the Total Vanguard Stock Market Index (VTSMX) and let that baby run...depends on your risk tolerance though so you might want to balance that out with some muni bonds to avoid the taxes...

You might also want to check if your employer offers a deferred compensation program. If your a high income type person then you probably have significant value for who you work for. Blue chips offers this as well as a number of other large firms.



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