non deductable IRA contributions

Regardless of income, if he has no retirement account at work, he can take the deduction. I'll assume he does have a 401(k), so it's not deductible.

Yes, he can make the non-deductible contribution to the IRA.

As someone one corrected me, your guy has only one IRA, regardless of the number of accounts they are in. Non-deducted deposits are tracked via 8606 as you note. Any withdrawal (or Roth conversion, for that matter) is pro-rated between pre and post tax deposits.

The obvious advantage is the tax deferral on the growth. A potential advantage comes in 2010, maybe, when we might be able to convert, regardless of income, to a Roth IRA. One trick (legal, of course) is to roll all pretax funds into the 401(k) account, so only post tax money is available for Roth conversion, and no tax due. Did I cover your question? Miss anything?

Joe

a couple of points. first, he has no earned income, so he cannot take the deduction. Second, your point about only having one traditional IRA regardless of the number of accounts is a good one. And due to his AGI, he is precluded from a Roth IRA.

So, I guess he can put money into a traditional IRA, nondeductibly.

Will he be penalized for early withdrawal, even to the proportion of his nondeductible contributions?

In article , Gil Faver >>

Ah, additional and quite critical information. Best to include it in original post.

In order to contribute to either a Roth or a traditional IRA, you must have at least that much Taxable Compensation.

Taxable Compensation includes wages, self employment, certain farming and fishing income, bonuses, tips, severance pay and, for IRAs, it also includes alimony income.

It does not include interet, dividends, capital gains, gambling winnings, rental income, social secuity, IRA distributions or pensions.

So if there is no Taxable Compensation there is no allowed IRA contribution.

N/A

No earned income = no IRA deposit of any kind. I'm sorry, when you said $400K AGI, I assumed. My bad. If he is under 59-1/2 he has a penalty for early withdrawal, yes.

Joe

ah, when I said $400k AGI, I was ambiguous . . .

thanks for the refresher, all.

Arthur Kamlet wrote: [...]

There is the exception of the IRA contribution allowed for the spouse with no earned income of their own, based on the other spouse's earned income, but it would still probably be non-deductible in this case due to AGI.

No, not really, in my opinion. Because of the special rules coming up about conversions from non-deductible Traditional IRA's to Roth regardless of AGI, you could tuck away maybe an extra $5 or $10K into a Roth, but that's about it.

-Mark Bole