Today's Officer - Winter 2007 - (Page 9) MESSAGE CENTER MONEY Don’t Overlook the Spousal IRA ARMY CAPT. RICK MEYER and his wife, Cindy, recently started a family. They both prefer Cindy to stay home with their son, James, for a few years but they also want to continue saving for Cindy’s retirement. Fortunately, they can take advantage of the taxdeductible “spousal IRA,” which allows spouses who are not working outside the home to save up to $4,000 a year ($5,000 annually for those age 50 and older). Current IRS rules allow for a fully deductible spousal IRA for taxpayers who are married, filing jointly, and have an adjusted gross income (AGI) of up to $156,000. The deductibility phases out for an AGI between $156,000 and $166,000, and no deduction is allowed for an AGI above $166,000. How much can this add to the family retirement fund? Let’s assume Cindy is 28 years old, and the Meyers fully fund a spousal IRA for five years (a total of $20,000) and then stop when Cindy returns to the workforce. If the spousal IRA earns 8 percent annually and they let the money continue to compound until Cindy is age 65, the spousal IRA will be worth more than $297,000. Of course, withdrawals from the spousal IRA will be taxable in retirement. Rick and Cindy also could explore using a Roth IRA. This is funded with after-tax dollars but grows tax-deferred and offers tax-free withdrawals in retirement. Which is better? It depends on their current tax bracket and what their anticipated retirement tax bracket is. MOAA’s Roth versus Traditional IRA calculator (online at www.moaa.org/financial center/calculators/rothvsregular.asp) can help them decide. Whether it is Roth or regular, don’t pass up an IRA savings opportunity just because one spouse is temporarily out of the workforce. COMMUNITY One-Stop Information Shop SERVING IN THE PENTAGON? Just visiting? If you’re in the area, stop by MOAA’s Pentagon office within the Pentagon Federal Credit Union’s main office. Staff experts are prepared to assist you with a variety of issues that affect active duty and retired officers and IMAGES: TOP, TIMOTHY COOK; BOTTOM, JEFFREY MARKOWITZ/CORBIS their spouses. If you need help making the military-tocivilian transition, figuring out TRICARE services and supplemental insurance programs, finding educational programs or scholarships for you or your children, or learning more about MOAA’s legislative efforts, this is your one- stop shop. You also can pick up copies of MOAA publications covering everything from the Survivor Benefit Plan to preparing for a second career. So don’t be shy — stop by! MOAA’s Pentagon office is open Monday through Friday from 7:30 a.m. to 2:30 p.m. Eastern time. Winter 2007/08 TODAY’S OFFICER 9 http://www.moaa.org/financialcenter/calculators/rothvsregular.asp http://www.moaa.org/financialcenter/calculators/rothvsregular.asp
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.