Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

IRAs are a girl's best friend

Dear Dollar Diva,
I am a housewife and have received conflicting information on whether we can set up an Individual Retirement Account in my name since I receive no income. Could you please set me straight?

Yes, Virginia, there is a Santa Claus -- and when it comes to IRAs, your hubby is your personal jolly elf. There's a lot of confusion about the spousal IRA because the rules were changed in 1998, but the Diva is here with the scoop on annual contributions to an IRA for the non-paid housewife.

Traditional IRA

1. Must file a joint tax return with husband

2. Maximum contribution is $2,000

3. The housewife must be less than 70½ years old by the end of the calendar year.

4. Contributions must be made by the due date of the tax return (not counting extensions), which will be April 17, 2000, for the 1999 year. The Diva recommends making IRA contributions as early as possible. The beauty of the IRA is that you don't pay tax on the interest, dividends and capital gains until you start making withdrawals. The longer your money is invested, the longer the period of compound, tax-deferred earnings you can enjoy.

5. If your husband is covered by a retirement plan at work (including a Keogh), the housewife's IRA deduction is reduced when joint Modified Adjusted Gross Income exceeds $150,000. She is not allowed when it exceeds $160,000.

6. If husband is not covered by a retirement plan at work (including a Keogh), IRA contributions are fully deductible regardless of income.

Roth IRA

1. Same as (1.) above.

2. Same as (2.) above.

3. Same as (3.) above.

4. Same as (4.) above.

5. Roth IRA contributions are not deductible.

6. Contributions are reduced when Modified AGI exceeds $150,000 and not allowed once it exceeds $160,000.

By the way, working wives provide the same opportunities for non-income producing husbands. The Diva thought you might like to know.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.