Dear Readers,
I don't know about you, but I am glad the anniversary of 9/11 is over. It was emotionally draining to watch it all again and yet, how could you not? It felt as if everything happened yesterday, not 12 months ago.

Just below the surface the wounds are still raw. To see everything unfold again resurrected the horror, the pain, the helplessness, the rage we felt last year. This will take a long, long time to heal. Much longer than it will take to replace the buildings.

Yet life goes on. Those of us who remain must deal with what, in comparison, seem like trivial issues -- decisions about a retirement plan, how to best save for our children's education, and so forth. But to honor those who died we must go on. Because they represented our way of life -- the economic, political and social freedoms that allow us to be diverse, yet one. As imperfect as our system is, it is still the best around. We will never forget. Must never forget.

God bless America.


Dear Gail,

I have a company sponsored profit-sharing plan. My wife is a housekeeper. Can she open a regular IRA account? I know I can't. Thanks for your answer.


Dear Stephen --

Provided you file a "joint" tax return, your wife can definitely have an IRA. However, the type of IRA she is allowed -- deductible, non-deductible or Roth -- depends how much income you have.

Spousal IRAs were first introduced in 1974 as part of the Employee Retirement Income Security Act (ERISA). You may recall that for years, the amount a non-working spouse could contribute to an IRA had to be coordinated with what the working spouse contributed, so that, as a couple their total IRA contributions didn't exceed $2,250.(!) Thankfully, Taxpayer Relief Act of 1997 made this a whole lot simpler: today each spouse can contribute the legal limit to their own IRA. This year that amount is $3,000. Those over age 50 can add another $500.

I applaud you for recognizing the need for your wife to save as much as she can for retirement. Study after study confirms that women enter retirement with much smaller nest eggs than men and receive, on average, about 25% less Social Security. Here are the main reasons: women tend to work in lower-paying jobs (although this is slowly changing) and as a result they are limited in how much they can contribute to their employer's retirement plan.

A lower salary also means women receive significantly less in company "matching" funds if this is part of the plan. However, the biggest factor is that woman are most likely to take time out of their "official" work lives to raise children. Allowing a non-working spouse to contribute to an IRA during these years is a small but important step women can take to make up for the retirement benefits they are not accumulating through a company plan or Social Security.

If you were not participating in a retirement plan at work, then you could each contribute $3,000 (or $3,500) to a tax-deductible, traditional IRA. This is what you're probably referring to as a "regular" IRA. However, since you are fortunate to have a company-sponsored plan, the deductibility of your IRAs depends upon your income.

The important number is your Adjusted Gross Income (AGI). If your salary and your deductions haven't changed much from last year (you didn't have quintuplets in the past 6 months, for instance), you can get a pretty good idea of what your AGI will be this year by digging out your 2001 tax return. The last line (#33) on Form 1040 is your AGI.

For 2002, if you are married and file jointly, you can each contribute the maximum allowed to a tax-deductible, traditional IRA until your AGI hits $54,000. If it falls between $54,000-64,000, then you are still allowed to contribute the full amount, but only part of it will be tax-deductible. If you put it all into a traditional IRA, you have to file Form 8606 to let the IRS know that you paid tax on a portion of your contribution. This is important. If you don't, you will be taxed on this money when you take it out later.

Your other choice would be to put the deductible amount into a traditional IRA and the non-deductible part into a Roth IRA where it can grow tax-free as opposed to tax-deferred.

If your 2002 Adjusted Gross Income as a couple is more than $64,000 but less than $150,000, the spouse covered by the employer-provided retirement plan is no longer eligible to make a tax-deductible IRA contribution. However, the non-working spouse is. In other words, if your AGI is between $64,000 and $149,000 you should consider a Roth IRA for yourself and have your wife contribute to a tax-deductible, traditional IRA.

Once your joint income exceeds $150,000, neither of you is eligible for a tax-deductible IRA. And if your AGI is higher than $160,000, then a Roth IRA is also out of the question for both of you. Your only option at that point are after-tax contributions to traditional IRAs.

If you make your IRA contributions before the end of the year and later find out that your AGI is higher or lower than you expected, there is an "Oops" process that allows you to correct your IRA contributions and move them into the appropriate type of IRA account. For instance, suppose you thought your Adjusted Gross Income was going to be below $64,000, so you contributed $6,000 ($3,000 each) into tax-deductible, Traditional IRAs for the two of you.

Then, when you get your W-2 Form from your company in January, you discover your income was actually $68,000. This means that only your wife was allowed a tax-deductible IRA. At this point you should contact your IRA custodian, explain the situation and fill out the necessary forms to shift your IRA contribution into either a Roth or an after-tax Traditional IRA. Provided you do this before you file your 2002 tax return, there is no penalty.

You're smart (and thoughtful) to want your wife to have adequate retirement income. It's good for her as an individual and for the two of you as a couple.

Take care,



I feel like a complete dunce when it comes to retirement plans, etc. so I hope you can educate me on some basics. I will be 54 this year, with 18 years of service for a company that is going down the tubes. I've already lost over 50% of my 401(k) dollars due because they were invested in company stock and its down to less than $2 per share.

I recently moved what was left to the Guaranteed Fixed Income option. I anticipate getting the "pink slip" any day now, but I don't know what to do with the 401K money if/when I'm laid off.

I've heard I need to put it in an IRA rollover account so the money isn't taxed. In a separation package that our company puts out, there's no mention of an IRA rollover account. All they mention is that we can't put it in a traditional IRA.


Dear Rebecca --

It sounds as if your human resources department is being run as poorly as your company in general. By law, you MUST be allowed to roll your 401(k) money into a Traditional IRA.

However, UNDER NO CIRCUMSTANCES should you let your company make the check out to you. If this happens, your employer is required by law to withhold 20% of the value of your 401(k) account and send this to the federal government. You'll get this back when you file your 2002 income taxes next year; the withholding is just in case you don't roll it into an IRA within 60 days. However, in order to get credit for rolling over the entire amount, you would have to come up with the withheld 20% today!

The cleanest way to get the money from your 401(k) to a traditional IRA is via a "trustee-to-trustee" transfer. You open a traditional IRA, or use an existing account. Provide the trustee of your 401(k) with the paperwork so they can transfer the money directly into your IRA without you ever touching it.

I'm sorry you're going through this. Once again, this illustrates the importance of being diversified with your investments. If your retirement plan assets are heavily invested in your own company, you are dependant upon your employer for both your current AND your future (retirement) income. That's too big a risk from my standpoint.

I strongly recommend you find an experienced financial advisor you feel comfortable working with who can help you re-grow your retirement funds.

Best wishes,


If you have a question for Gail Buckner and the Your $ Matters column, send them to moneymatters@foxnews.com  along with your name and phone number.

To access Gail's past columns, simply use our new "Search" function: type in "Buckner" and you'll be able to get all Your $ Matters columns since April 2001.

The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.