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Rusty wrote:

I think I know the answer to this question (yes), but I'm not 100% sure. The question is: Can my wife open a $2K Roth IRA? Here is the situation. She lost her job in Dec of 1997, however she did not have her 'official' termination until mid Jan 1998 due to a screwup at the company. At that time she receive her vacation pay (about $800) with some 401k money taken out. She also had her pension rolled into an IRA early in 1998. The only money she has receive in 1998 (other than the amount at termination) is about $5.5K in unemployment compensation. BTW, she still has the 401k with the former company. If I read the IRS's IRA publication correctly, even with no pay in 1998, she can still have a $2000 IRA. I make over the $4K needed to have a full $2K spousal IRA for her and a $2K IRA for myself. I am concerned that the pension or 401k she had in 1998 might be a problem. Can she have a Roth IRA?

The only real question is can she open a deductible IRA because of her 1998 401k participation. That answer depends on your AGI. But as you noted, as long as you make at least $4K, both of you can have an IRA. And yes, she can have a nondeductible Roth. She can also have a fully deductible, partially deductible or nondeductible traditional IRA depending on your joint AGI. The phase out of deductibility begins at $50K and is disallowed at an AGI over $60K in your case. If you're going to make a nondeductible contribution, then a Roth IRA is the only way to go.


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