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<< I have a 401K. It did'nt start until mid-year.
My wife does not have a retirement plan.

I have set up an IRA for her.
Since the 401K for me did'nt start till mid-year and I
did'nt exceed the allowable percentage contribution amount, can I contribute to an IRA or make an additional contribution to my 401K plan on a pretax basis?

A couple of amplifications on previous posts. Since you were covered by a retirement plan for at least one day in 1999, deductibility of both your and your wife's IRA contributions is subject to the joint AGI test. The income level is different. I think $60,000 for yours and $160,000 for hers, but I don't have my reference materials handy. This is covered in the 1040 instructions for line 23.

If you cannot make a deductible contribution to your traditional IRA, I would recommend a Roth IRA over a nondeductible traditional, assuming your joint income is under $160,000. If you're eligible to contribute to Roth IRAs, your joint income is low enough to make a contribution to your wife's traditional IRA deductible. In that case, you'll need to decide whether you'd rather have the current deduction for the contribution to your wife's traditional IRA or the future tax-free benefits of a contribution to your wife's Roth IRA.

Phil Marti
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