Good Answer, Bread! Severla excellent points.

"JustinD" <justindeardorff[at]gmail.com> writes:

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Better than a non-deductible contribution to a traditional IRA?
How?

In both cases, contribution is not deductible up front.
In both cases, cash coming out of the back end gets taxed.
In both cases taxes are effectively deferred on gains.

So what about the VA (and it's costs, complexities) make
it any better than the IRA?

--
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I agree that a Variable Annuity might be your best bet for her at this
time. Depending on what you need it for, there are a million great
options out there. Just make sure you get one where your investments
are unrestricted to a specific model or % of fixed income. You are
paying extra for the insurance so I think you should use that safeguard
to invest with more potential for gain(and loss).

beliavsky[at]aol.com writes:

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I am assuming that you are covered by your employer's plan,
otherwise there is no income limit for deductibilty.

For those viewing from the sidelines, the income limits on
deductibility of traditional IRAs only apply if you and/or
your spouse are "active participants" in an employer plan.

- quote -

I avoided non-deductible IRA contributions for a few years, but
now regret it and have been making them for a while. The
downsides:
- when distributions are made, the growth is taxed
as income, even if it was due to cap-gains internal
to the IRA.
- very minor inconvenience of tracking IRA cost basis
(trivial form to file, plus,when distributions are
made, calculating the percentage of the distribution
which is taxable
upsides:
- rebalance investments with no tax consequences
- tax deferral on all income - ie. dividends, etc
- not included in most Financial Aid calculations for college
- better protected in lawsuits and bankruptcies

Given how little one is permitted to put into one of these
anyway (even after the recent increases - currently a
whopping $4000/year - like anyone's going to retire in
any reasonable time on that much), I'd put the money into
the IRA - *and* invest more outside it...

And finally, if you do have a low-income year (ie. between
jobs, whatever) you may get a good opportunity to convert
your IRA to a Roth. Can't do that with non-IRA money.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
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I recommend large, med and small cap index funds. Just park the money
in those and you will only pay taxes on distributions; these are less
than 5% a year. When you do cash out you will be taxed at long term
cap gains rates and may come out ahead of a tax deferred alternative.

Depending on your risk tolerance and need for the funds, consider up to
100% stocks.

Frank


beliavsky[at]aol.com wrote:
is simply to invest in
- quote -

beliavsky[at]aol.com wrote:

[..]

- quote -

Since you mentioned municipal bonds, I feel compelled to mention that
you look at ibonds as well since the interest they earn is
tax-deferred.

Anoop

beliavsky[at]aol.com wrote:
- quote -

A traditional IRA has some advantages in that some legal judgements
can't touch those assets. In addition, if she later gets a 401k, she
can eventually roll over that account to the IRA giving more flexible
investment alternatives.

--
Ron

Another option is a Variable Annuity... They typically have more
expensive than other investments and the contributions are NOT tax
deductible but the money does grow tax deferred and they often have
other attractive benefits (aka "riders") you can look into. Vanguard
offers cheap VA's or you can buy one through an Investment Advisor.

Can you contribute more to your retirement plan to make up for her
contributions or do you already max it out?

depends how much you could "afford" to contribute. If the amount was
high enough, ever consider having her consider herself a consultant and
open the door to self employed retirement plans? SEP IRA come to mind
(not sure what rules on these are, but is an idea...)

My wife's employer does not offer her a retirement plan (she has a
temporary position), and our joint income exceeds the contribution
limits for a Roth or deductible Traditional IRA. A non-deductible
traditional IRA does not seem too attractive to me. I think the best
"retirement savings plan" for her at present is simply to invest in
some mix of stocks and municipal bonds in a taxable account. Any
suggested alternatives?