Nondeductible IRAs

Michael Sheehan

Physician's Money Digest, November15 2004, Volume 11, Issue 21


The federal government has raisedthe contribution ceiling for IRAs to$3000 this year, but there are still somelimits on deducting what you put inyour IRA. In general, if you're married,participate in an employer-sponsored ordeferred-compensation retirement plan,and your adjusted gross income (AGI)is more than $75,000 ($55,000 for singles),you can't write off the contributions.That shouldn't stop you frommaxing out your IRA, some financialadvisors say; at an annual 8% returnover 15 years, the maximum contributionwill add $164,000 to your retirementnest egg. If your AGI is less than$160,000 ($110,000 for singles), youmight want to put the maximum into aRoth and get your money back tax-freewhen you retire. If you're overage 50, you can deposit a catch-up contributionof $500 more.