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Hello,

I'm trying to find a clear answer on this subject. I am aware of the IRA limits for yearly contributions and everything I have read indicates this is an individual limit.

Is the limit doubled if you are married or do we need to open a second IRA account in my wife's name? I have a Roth IRA now.

And on this same subject...I make 130K for my salary so I guesstimate that in due course I may no longer be eligible for contributions (I am 39 now). So, assuming I will have to open a second IRA in my wife's name, should I open a traditional account instead of another Roth? I mean, at least then I can still contribute something to it should I earn more than 160K even if there is no tax advantage any more.

My wife is not working at the moment but if she does decide to go back to work we would then obviously be over the limit.

So, in short, can I contribute 8K in "both of our names" to my IRA or do I have to open another one in my wife's name? And, if I do have to open another one, should I go for another Roth or a traditional IRA?
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Unfortunately, or fortunately (depending on your perspective), there is no such thing as a JRA (Joint Retirement Account). IRA's can only be in one person's name.

So yes, as long as your joint income is under $156k you can contribute up to $4000/person to IRAs. I would recommend that you begin contributing to Roth IRAs for both you and your wife. I'm not sure if the eligibility requirements are currently indexed to inflation, but they should be, so hopefully you'll have several years to contribute to those Roths (or at least until your wife starts working again).
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So, in short, can I contribute 8K in "both of our names" to my IRA or do I have to open another one in my wife's name? And, if I do have to open another one, should I go for another Roth or a traditional IRA?

As has already been mentioned, the $4,000 limit is per person, and each of you must have your own account. Joint filers can each contribute $4,000 if between them there's $8,000 in earned income. The limits go to $5,000 per person next year.

Regarding Roth income limits, the key number is not gross income but "Modified Adjusted Gross Income" (MAGI). MAGI is reduced by such things as 401(k) and FSA contributions.

Assuming your wife doesn't work at all in 2007 she could make a deductible traditional IRA contribution. If you have the discipline to invest the tax savings rather than blowing it on Twinkies, the after-tax long-term numbers, in theory, come out the same as if she made a nondeductible Roth contribution.

Roth vs. traditional is somewhat of a crap shoot. You get the immediate tax benefit from the traditional, you get the tax-free long-term growth from the Roth. The Roth also gives you the flexibility of no required distributions, while you must begin taking distributions from your traditional at age 70 1/2.

There's lots of good information and more detailed explanations in IRS Publication 590.

Phil
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I'm trying to find a clear answer on this subject. I am aware of the IRA limits for yearly contributions and everything I have read indicates this is an individual limit.

You are correct.

Is the limit doubled if you are married or do we need to open a second IRA account in my wife's name? I have a Roth IRA now.

Since it's an individual limit, each individual may contribute to their own IRA. So you need to open an IRA for your wife if collectively you want to contribute more than $4k for 2007.

And on this same subject...I make 130K for my salary so I guesstimate that in due course I may no longer be eligible for contributions (I am 39 now). So, assuming I will have to open a second IRA in my wife's name, should I open a traditional account instead of another Roth? I mean, at least then I can still contribute something to it should I earn more than 160K even if there is no tax advantage any more.

My wife is not working at the moment but if she does decide to go back to work we would then obviously be over the limit.


Not so fast - the income limits for Roths are now indexed to inflation. For MFJ, the 2007 MAGI limits are:

Up to $156k - full contributions allowed
$156k - $166k - pro-rated contributions allowed
Over $166k - contributions not allowed

Additionally, the income limits are on your Modified AGI (MAGI). MAGI calculations are covered in IRS Publication 590: http://www.irs.gov/pub/irs-pdf/p590.pdf They allow you to subtract things like your 401(k) contributions, FSA or HSA contributions before you determine your eligibility. So a couple MFJ for 2007 who each max out their 401(k)s @ $15,500 and each have an individual HSA or FSA contribution @ $2850 could have an AGI of $192,700 before even reaching the phase-out range, and could make $202,700 before being completely ineligble to contribute.

So, assuming your current income rises about as much as the inflation indexing, your wife could potentially make $60k - $70k a year and you could each still be eligible to contribute to a Roth.

And, if I do have to open another one, should I go for another Roth or a traditional IRA?

Has your wife worked at all this year? If she did, and she was not covered by a retirement plan where she worked, she may be able to open a traditional deductible IRA - see the section on "Limit if Covered by an Employee Plan" in Pub 590, starting on page 15.

If she can open a deductible IRA, then the question is - deductible traditional vs. Roth - and the answer depends on if you want to take the tax benefit now or later (realizing that Congress could change the rules between now and later), and if you take the benefit now, you are willing to live with the minimum distribution requirement along with paying taxes later.

If she can't open a deductible IRA, then the choice is between a non-deductible IRA and a Roth, and a Roth is probably preferable - there are no minimum required distributions, and you will pay no taxes on withdrawals, assuming your wife is at least 59 1/2 when she takes the withdrawals, and Congress doesn't change the rules. Plus, if push comes to shove, you can withdraw your contributions from a Roth without paying any taxes or penalties.

If you get to the point where your income does not allow Roth contributions, there may be another potential way to contribute - beginning in 2010, if Congress doesn't change the rules, the income cap on conversions to a Roth are lifted. So you could contribute to a non-deductible IRA and then immediately convert to a Roth.

Also, please realize that you can each have more than one type of IRA account. So if you do get to the point where either of you can't contribute to a Roth, at that time, you can open a traditional non-deductible IRA in that person's name.

AJ
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If she can't open a deductible IRA, then the choice is between a non-deductible IRA and a Roth, and a Roth is probably preferable

A slight quibble here, mainly because it's so rare to find a no-brainer in tax law. If one qualifies to contribute to Roth a Roth contribution is always better than a nondeductible traditional contribution.

Phil
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