Newsletter for July 2002

If you or your spouse participates in an employer-sponsored or other qualified retirement plan, take a look at this month's featured question to learn how this may limit your tax-deductible IRA contributions. The July issue also highlights some retirement planning resources, including Article Briefings on women's financial planning and great retirement locations -- the Resource Link will lead you to a fast, fun quiz that suggests retirement locations based on your specific needs and interests. Other Article Briefings will update you on recent 401(k) commentaries and the steps some companies are taking to improve their employees' financial literacy.

Featured Question of the Month
How Employer-Sponsored Retirement Plans May Effect Your Tax-Deductible IRA Contributions

Article Briefings
Best Places to Retire
Prep Women Better for Retirement
The Great 401(k) Hoax
The War on Financial Illiteracy

Resource Link
Find Your Spot

Q. If I participate in an employer-sponsored or other qualified retirement plan, does that affect the amount of my IRA contributions that are tax-deductible?

A. Q. If I participate in an employer-sponsored or other qualified retirement plan, does that affect the amount of my IRA contributions that are tax-deductible? A. If you or your spouse is an "active participant in a qualified plan," the government limits the amount of your IRA contributions that are tax-deductible. The limit is based on your Adjusted Gross Income, or "AGI" (see www.ira.com/glossary.htm for definition of terms). In accordance with recent tax revisions, the limits will be changing for each of the next few tax years.

In general, the greater your AGI, the less you are eligible to deduct. The deduction is gradually phased out, until those with the higher AGIs are ineligible for any tax-deductible IRA contributions. There is a formula to calculate the amount by which your deduction is reduced, but it is somewhat complicated -- you may want to consult a qualified tax professional if you are affected by the phase out. Also, additional computations and income adjustments must be made if you are receiving Social Security benefits and hope to make a tax- deductible contribution to an IRA.

If you are a single taxpayer who actively participates in a qualified plan, the phase-out levels for tax-deductible IRA contributions are as follows:

Tax YearAGI Phase Out
2001$33,000 - $43,000
2002$34,000 - $44,000
2003$40,000 - $50,000
2004$45,000 - $55,000
2005+$50,000 - $60,000

If you are married, file jointly, and are an active participant in a qualified plan, the phase-out limit is based on your combined AGI. See the table below.

Tax YearCombined AGI Phase Out
2001$53,000 - $63,000
2002$54,000 - $64,000
2003$60,000 - $70,000
2004$65,000 - $75,000
2005$70,000 - $80,000
2006$75,000 - $85,000
2007+$80,000 - $100,000

Under certain circumstances, it is possible for the spouse who is not an active participant in a qualified plan to make a deductible contribution, which is affected by a combined AGI phase-out range between $150,000 and $160,000.

If you are married and file separately, the deduction amount still may be reduced for both you and your spouse if one of you actively participates in a qualified plan. If either of you actively participates in a qualified plan and if either of you has an AGI above $10,000, no part of an IRA contribution is tax deductible for either spouse.

Marital status is determined at the end of the year, so if a person obtains a divorce during the year, he or she would not be affected by their spouse's participation in a qualified plan. Also, spouses who have lived apart for the entire year and file separately may be treated as unmarried.

**SPECIAL NOTE: The above is provided for information purposes only, and is not to be construed as specific tax advice. A qualified professional should be consulted before implementing any financial or tax-planning strategy.

*NOTE: Some Internet email programs do not maintain links to extended web addresses. If you would like to read the full abstract, and the links below do not work for you, try copying the entire link and pasting it into the address window in your Browser.

Best Places to Retire
Money magazine chose the eight best places to retire based on cultural attractions, affordable housing, top-of-the-line medical facilities, and a mixture of clean area, low crime, reasonable taxes, and a moderate population...

Read the full abstract at: http://www.ira.com/news/life/7bf096df5427274277128cbb5c01346e.html

Siebert Speaks: Prep Women Better for Retirement
Muriel Siebert, the first woman to gain a seat on the New York Stock Exchange, recently told the Senate Special Committee on Aging that there are a number of reasons why women find themselves in financial trouble when they retire...

Read the full abstract at: http://www.ira.com/news/plan/fb95db88fe40250461ae7ef202003902.html

The Great 401(k) Hoax
DaimlerChrysler, Wyndham International, Bethlehem Steel, and other companies suspended their 401(k) matches during the recent recession, and Enron's collapse shed light on how 401(k) plans can injure their participants, but these situations do not highlight the innate flaws within the system.

Read the full abstract at: http://www.ira.com/news/plan/c0c0f4b7d9aa03c2c466fd562377109b.html

The War on Financial Illiteracy
The recent buzz about employee financial illiteracy prompted many employers to implement financial planning and investment advice courses and seminars.

Read the full abstract at: http://www.ira.com/news/prof/68f5dc54f064d4a3e06439247d20e190.html

Find Your Spot
http://www.FindYourSpot.com

FindYourSpot.com is a free online resource for relocation information and services, featuring an interactive database with photos, facts, and figures about America's best places to live, work, and retire. Take a free quiz to find towns and cities that fit your preferences in the areas of climate, arts and culture, recreation, education, cost of living, and quality of life.


DISCLAIMERS

(c) 2001 Copyright Claimed, Internet Retirement Alliance.

Abstracts (c) Information, Inc., Bethesda, Maryland 301-215-4688. Redistribution is prohibited.

The material and information herein is obtained by from a wide variety of sources. The Internet Retirement Alliance (IRA.com) believes this information is accurate, current, and authoritative, but it may not be. The Internet Retirement Alliance (IRA.com) provides the information "as is" without any express or implied warranties.

The Internet Retirement Alliance (IRA.com) does not provide legal, accounting, investment, or other professional services. If the reader requires legal, accounting, investment, or other expert assistance, the services of a competent professional person should be sought.

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