IRA or Roth IRA

[Guest rpm]

Help! I am new to this forum and need some advice quickly. My wife and I make a combined AGI of $140,000. I contribute to my 401K at work and also contribute to a Roth IRA. My wife, though, has profit-sharing at work and I want to get her setup with either a regular IRA or a Roth IRA---I need to know which way to go.

Can she contribute to a Roth IRA if I have maxed out my Roth IRA contribution?

If we need to get her on a tax deductible IRA, what is the max contribution she can make?

Thanks for your help!

[Guest quinn the car fixer]

if filing jointly, your agi is below the limit to make roth ira contrib's. neither of you could make tax deductible traditional ira contrib's.

i believe you can both make the max roth contrib since she has earned income

[jevd]

See IRS PUB 590 for additional information regarding IRAs

HERE

[John G]

A point of clarification: a spouse need not have any earned income if the partner has sufficient income to cover both Roths.

Generally, I would suggest a Roth as the subsequent tax treatment is attractive, especially when you consider that you have no mandatory withdrawal schedule with a Roth.

If you income continues to climb, in a few years you may no longer be able to contribute to a Roth. So, that's just one more reason to start now.

If you own a business, you have other options for "retirement" investments... ask your CPA or tax advisor.

[mbozek]

The primary advantage of a Roth IRA is the ability to defer commencment of benefits until the later of the death of the owner and spouse which allows the funds to compound tax free for period of 50 years or more. The primary disadvantage of a Roth IRA is that the individual must pay tax up front on the contribution which result in the opportunity cost of the amount used to pay taxes over the same period. In other words if an individual in the 30% bracket contributes $4000 to a Roth he will pay $1200 in taxes in 05. Over the next 20 years the 1200 would have been worth $5593 in interest at 8% tax free. The $5593 will reduce the earnings of the funds tax free in the Roth. In other words a Roth benefits younger persons who are in the lower tax brackets (10-15%) because this minimizes the tax cost of the Roth contribution.