Raul and Jenna Are Married and Are Both Working

question 28

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 $185,000 of AGI for 2014.
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:

Teenagers

Individuals who are in the age group of 13 to 19 years, a period marked by various physical, emotional, and psychological changes.

Starting To Smoke

Refers to the initial stage or act of beginning to use tobacco products, typically cigarettes.

Price Supports

Government interventions to maintain the market price of a commodity or product above competitive levels, often to protect producers.

Misallocation

The inefficient distribution or use of resources in an economy or market.