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-- Posted: Oct. 8, 1999

Dorothy Rosen -- The Dollar Diva Ask the Dollar Diva

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.

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Traditional IRA

  1. Must file a joint tax return with husband

  2. Maximum contribution is $2,000

  3. The housewife must be less than 70 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.

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