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<< When I read the Fool stuff, I was under the impression that I can make a maximum contribution of $2000 to an IRA per year, my wife can do the same, and we could make a maximum contribution of $500/year to an Education IRA for my son. I thought it was pretty clear.

I was then discussing it with a coworker and he said that the $2000 limit was only for DEDUCTIBLE contributions and that there was not really a limit for the amount I can contribute to these IRAs. >>

As a tax expert, your coworker is a great plumber. You are right, (s)he's wrong. The annual limit for combined traditional and Roth IRA contributions is $2,000 per person. Since you're covered by a plan, you cannot deduct a traditional IRA contribution at your income level--do a Roth. Since your wife isn't covered by a retirement plan (I suggest you not tell her she "doesn't work"), you can deduct a traditional IRA contribution for her at your income level or do a Roth. If you can afford not to take the deduction, I recommend a Roth for her too.

Retirement plans and other IRA contributions don't affect Education IRAs, which aren't really IRAs at all. The limit is $500 per beneficiary per year, the conribution deadline for a calendar year is 12/31 (unlike real IRAs), and there is an income limit on the contributor's AGI. (If your AGI exceeds the limit, give the money to your son and let him contribute it.)

Phil Marti
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