Tax Tip for SAHMs: Homemaker IRAs - (Tax Year 2002)
by Shannon Nash, Esq., C.P.A.
It’s a fact. Women live longer than
men. The average woman lives to the age of 79.4. That’s past
the average working age of most Americans. For many of these women,
retirement planning has become crucial. But retirement planning
is no longer just for the working mom. With a homemaker IRA, stay
at home moms (SAHMs) can save for the future too.
Here’s how it works: You can contribute up to $3,000 to an
IRA account and take a tax deduction for this contribution. This
$3,000 will grow tax-free and then after age 59 ½ you can
begin to withdraw amounts from your new nest egg. You will have
to pay taxes on the withdrawals, but the tax-deferred growth will
be worth it.
An example from the New Homemaker’s website (http://www.newhomemaker.com)
illustrates this point. For a SAHM who plans to ‘retire’
at 60, $2,000 invested a year starting at the age of 30 that grows
at 8% will net $226,566.
Now to a few pesky tax rules. This homemaker IRA is only available
for married taxpayers filing jointly and if the working spouse’s
income is greater than the total of all IRA contributions for both
spouses. Also, it’s not available to married taxpayers with
adjusted gross income of $160,000 or more. And the homemaker IRA
may be a traditional or a Roth IRA.
Does this all sound like a great idea but you missed setting this
up in 2002? Don’t worry, SAHM’s have until April 15,
2003 to fund a homemaker IRA. n.
Resources
• IRS’s website – http://www.irs.treas.gov
• IRS Publication 590, Individualized Retirement Account
Shannon Nash is a tax attorney and C.P.A. She
received her Bachelor’s degree in accounting from the University
of Virginia, McIntire School of Commerce and her law degree from
the University of Virginia School of Law. She is a member of the
Virginia and Washington D.C. bar and holds a C.P.A. license from
the State of Virginia. She is an officer of the American Bar Association
and Chair of the National Bar Association Tax Section. Shannon lives
in Westlake Village, California (outside of Los Angeles) with her
husband, an ex-submarine officer, and her son. She also writes the
"Special Needs Journey"
column.
March 15, 2003
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