Raul and Jenna Are Married and Are Both Working

question 95

Essay

Raul and Jenna are married and are both working.They are both over age 50.Jenna participates in her employer's Sec.401(k)plan and makes the maximum contribution and enjoys a company matching contribution.Raul's employer does not maintain a retirement plan so he would like to save as much as possible in a tax-advantaged manner for retirement.They expect to report $188,000 of AGI for 2016.
a.What is the maximum amount that Raul can contribute to a traditional IRA and how much can he deduct?
b.What is the maximum amount that Raul can contribute to a Roth IRA and how much can he deduct?
c.How could Raul contribute to both the traditional IRA and Roth IRA to maximize current and future tax savings?

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Definitions:

Oil Refinement

The industrial process of transforming crude oil into usable products including fuels, lubricants, and petrochemicals.

Pollution

The contamination of the natural environment, which can lead to harmful effects on ecosystems and human health.

Marginal External Cost

The additional cost imposed on society that is not accounted for by the producer as output increases.

Marginal Social Cost

The cost to society of producing one additional unit of a good or service, including both the private costs and any external costs.