Money Matters

IRA investing tips for a woman about to be married

July 27, 2013 

Q. I have access to a 401(k) at my new workplace, but they don’t offer any type of match. Someone told me I should contribute to either a traditional or Roth IRA instead because I had contributed to my previous employer’s 401(k). I thought you could contribute to as many plans as were available to you. I make around $48,000. If my income is too high to obtain a tax deduction, is there any reason to contribute to a traditional IRA?

Another wrinkle is my upcoming marriage in October. Because of my husband’s income, I don’t know whether I will be able to contribute to a deductible IRA or a Roth IRA. If I contribute before my marriage, does that make any difference with the eligibility rules for deductions or contributions?

Congratulations on your pending marriage. Hope he’s as nice as his income. If you are getting married this year, you will need to file either married-filing-jointly or married-filing-separately. The deduction limits on modified adjusted gross income are so low, and the tax rates so high for married-filing-separately, that it’s doubtful you’d select this filing option. You will need to follow the eligibility rules for married-filing-jointly if you are getting married this year since that will be your filing status for 2013.

Deductible contribution eligibility income phase-out ranges for a tax-deductible IRA are $59,000 to $69,000 for single filers and $95,000 to $115,000 for those filing jointly. A full deduction is allowed for income at or less than the lower amount of the range, and a partial deduction is allowed for income up to the maximum amount. If you or, if married, you or your spouse are participants in an employer-sponsored retirement plan, no deduction is allowed for those making at or above the upper limit of the ranges. If you, and if married, you and your spouse are not participants in an employer-sponsored plan, you are allowed a deduction irrespective of both your incomes. For Roth IRA contributions, the income phase-out range for a single filer is $112,000 to $127,000, and for those filing jointly the range is $178,000 to $188,000.

You or your spouse must have earned income to make a contribution to either type of IRA. The amount of earned income must be equal to or exceed the amount of the contribution. Contribution limits are the same for both types of IRAs. You can contribute to both in the same tax year, but the total cannot exceed the maximum allowed contribution. The maximum contribution for 2013 is $5,500 for those younger than 50, and for those 50 and older a $1,000 catch-up is allowed for a maximum contribution of $6,500.

In addition to eligible IRA contributions, you can also participate in employer-sponsored retirement plans. The maximum amount you can defer in a 401(k) plan for 2013 is $17,500 if you are younger than 50. If 50 or older, an additional $5,500 is allowed for a total of $23,000. This annual limit must be combined for plans such as 401(k)s, SIMPLE IRAs and 403(b)s. Since you have changed jobs this year and contributed to your previous employer’s plan, you must be careful that you don’t exceed the limit if you decide to participate in the new employer’s plan.

Since your new employer’s plan doesn’t offer a match, I suggest you contribute to a Roth IRA if your combined incomes will allow. If your incomes are too high to contribute to a Roth IRA and you don’t have any rollover or tax-deductible IRAs, there is a way to fund a Roth IRA. Contribute to a non-deductible IRA, and then immediately convert this to a Roth IRA. A discussion with your investment adviser or a meeting with a fee-only financial adviser concerning this option may be appropriate.

Holly Nicholson is a certified financial planner in Raleigh. She cannot answer every question. Reach her at or P.O. Box 97128, Raleigh, NC 27624.

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