George Geek is 30 years old, single, and earns $103,000 a year as a software engineer for a small, start-up IT company. George’s company does not itself offer a retirement plan, and George is considering his options. The current contribution limits for both the traditional IRA and Roth IRA plans is the lesser of $5,000 or 100% of earned income. Which of the following statements applies to George’s situation?
Explanation
Answer: D - If George is 30 years old, single, and earns $103,000 as a software engineer for a company that does not offer a retirement plan, his combined contribution to a traditional IRA and a Roth IRA cannot exceed $5,000, assuming that he is eligible to contribute to both. Since George has no other retirement plan, he will be eligible to make tax-deductible contributions to a traditional IRA regardless of his income level. Contributions to a Roth IRA are never tax-deductible in any situation. (FYI: In 2010, a single taxpayer who earns less than $105,000 during the year is eligible to participate fully in a Roth IRA, but this number can change.)
