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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.

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