Question

"A married couple, where both individuals work, earns in excess of $124,000 in year 2020. Both individuals are covered by qualified retirement plans. Which statement is TRUE regarding contributions to Individual Retirement Accounts for these persons?"

Answer 1

Answer:

The question is not complete. Let me explain Individual Retirement Accounts (IRA)

Explanation:

There are two types of Individual Retirement Accounts (IRA). These are the Roth IRA and the Traditional IRA.

The maximum contributions allowed to Roth IRAs for 2020 are $6,000 for investors younger than 50 and $7,000 for investors older than 50.

If you’re single and you have no workplace plan, or if you’re married and neither you nor your spouse has a workplace plan, you may fully deduct your IRA contribution--regardless of your income.  However, if you don’t have an employer-sponsored plan, but your spouse has one, you may deduct the full amount if you’re married filing jointly, and your modified adjusted gross income (MAGI) is $196,000 or less.

• For Traditional IRA, married couples filing jointly can take the full deduction if they make less than $104,000. If you collectively earn between $104,000 and $124,000, you can take a partial deduction. And if you earn more than $124,000, you may not deduct anything.

• For Roth IRA, single filers with modified adjusted gross income (MAGIs) ranging between $124,000 to $139,000 may contribute a reduced amount.

Traditional IRAs are funded with pre-tax dollars, this means that you can write off the contribution during the year you make it. But this is governed by numerous factors.