New requirements

[Guest John&Barb]

My wife and I are over 50 and jointly file on our income taxes. I have a 401K plan which is max'ed out for the year 2001 and my wife's employer does not offer a 401K plan. The last piece of the equation is that my income dropped to 128K this past year and my wife earned 16K.

1) can I, and what is the amount I can contribute to an IRA for 2001. For 2002.

2) can I, and what is the amount I can contribute to a Roth IRA for 2001. For 2002.

3) same two questions as above pertaining to my wife.

Thank you for your assistance.

[JAMES PATRICK]

Provided your MAGI is less than $150,000 AND your wife does not have ANY pension plan these would be the answers:

1. $2000 non-deductible

2. $2000 Roth ( your max to both is $2000 total)

3. $2000 deductible OR $2000 Roth.

Next year the amounts for each of you would increase to $3500, depending again on your Magi and whether or not she is an active participant in a pension plan.

[John G]

The above answer mostly focused on 2001. As a result of the tax bill signed by Bush in June 2001, the IRA and Roth contribution limits will jump up as follows: $3000 in year 2002, $4000 in year 2004 and $5000 in year 2008.

So a person 50+ in this calender year {2002} would have a contribution max of $3500.... $3k base plus $500 for the new "catch up" provisions.

Note: a person that has the income qualifications that is age 50+ could start an IRA now at $5,500 to reflect both 2001 and 2002 maximums. A great idea for empty nesters whose incomes may exceed their current years needs. Ditto for the spouse if all the qualifications are met.