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Limits To IRA Contributions

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By ADON TAFT, Life to the Fullest

Hernando Today columnist

Published: December 8, 2008

QUESTION: – I retired at 59-and-a-half and utilized our IRA to pay off our house mortgage over three years (to minimize taxes) as interest and dividends were terrible and we needed the amount we had been paying monthly toward the mortgage to live on until obtaining our Social Security payments in January of 2009. Obviously that put a giant dent in the IRA but we planned on using it as a stepping stone to receiving our Social Security next January anyway.
My question then is: Can we slowly replace money into our IRA commencing in January when our Social Security starts for both of us and can afford minor payments?
I have a modest taxable pension, the taxes on which I can offset by making the IRA installments until age 70 when they will make us take some out. I feel this is a benefit as any investments in the IRA will not be taxed until I take the money back out.
Is there any chance I can put money into a Roth IRA and pay no tax ever?

D.A.
Spring Hill

ANSWER: – You only can put money into an IRA if you have earned income. You can contribute to an IRA only the amount you earn or $6,000 a year, whichever amount is lower. You may not contribute to an IRA after you reach the year in which you will turn 70.
There is no "tax free" IRA. If you contribute to a Roth IRA, you have to pay taxes on the amount of that contribution before you put it in the IRA but not on the amount you withdraw from the IRA. However, you are not required to take money out.
If you contribute to a traditional IRA, the amount you put in is not taxed at that time but you pay taxes on the amount you take out of the IRA. You are required to make withdrawals from the IRA after you reach age 70-and-a-half.

QUESTION: – I am 75 years old and currently receive Social Security. Being a retired U.S. government worker, my payment is subject to the write-off clause.
My wife soon will be able to collect Social Security and her draw will be much higher than mine.
Can I claim a spousal benefit based on her allotment and, if so, would it be subjected to the write-off clause?

C. F.
Weeki Wachee

ANSWER: – You could ask Social Security about a spousal benefit based on your wife's benefit from her own work record. It probably would be less than what you now receive on your own. Whatever the spousal benefit would be (usually about half of the wife's or husband's benefit), it would be reduced by two-thirds of whatever your government pension is.

QUESTION: - Most of my adult life I have been a homemaker, raising four children. Years ago I unsuccessfully sought Social Security disability payments as the result of a back injury when I was 18 that makes it difficult for me to sit or stand for long periods. Companies were reluctant to hire someone with back problems.
While my husband will qualify for Social Security payments of $1,900 a month when he retires, my question is, will I receive benefits?

D.W.
Brooksville

ANSWER: – If you worked a total of 10 years, you would qualify for benefits based on your own work record. The amount would be small since you have had little employment. It would be slightly over 20 percent more if you wait until you are 66 years old, the full retirement age.
You would be entitled to a spousal benefit based on your husband's work record. It probably would be higher than a benefit based on your own work record since it would be half of what his is, reduced by 25/36ths of 1 percent for each month you are younger than full retirement age when you apply for benefits.

If you have questions about any issues related to aging, except medical conditions, please write to Life to the Fullest, Hernando Today, 15299 Cortez Blvd., Brooksville, Fla. 34613, or send e-mail to adontaft@yahoo.com . Please include your name and address.

Adon Taft is a resident of Brooksville.

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