Sally and Patrick are married with 4 young children. Patrick stays at home with the kids while Sally works as CEO of a small manufacturing firm earning $105,000 annually. Sally is covered by a 401 (k) plan at work, but they would like to maximize their IRA contributions as well. Which of the following are true assuming their AGI is $105,897?

a. Sally and Patrick could each contribute $6,500 to a Roth IRA.

b. Sally and Patrick could each contribute $3,000 to a deductible traditional IRA

c. Only Sally can contribute to any type of IRA. Patrick has no earned income.

d. Patrick could contribute $5,500 to a traditional deductible IRA. e. "Sally and Patrick could each contribute $6,500 to a Roth IRA" and "Patrick could contribute $5,500 to a traditional deductible IRA"

e. "Sally and Patrick could each contribute $6,500 to a Roth IRA" and "Patrick could contribute $5,500 to a traditional deductible IRA".

Explanation:

Although one can have both a 401 (k) and an individual retirement account (IRA) at the same time but it's not always advisable because the one's income may be a limiting factor to tax breaks received. hence it's not advisable for Sally to have a traditional deductible IRA because Sally is already covered at work by 401 (k).

In the case of Patrick, if one's income is under a certain level or if one (or one's spouse) don't have an employer-sponsored retirement plan, the Traditional IRA contribution is fully deductible.

So, you (or your spouse) do have a 401 (k) or pension plan, the tax-deductible portion of your IRA contribution may be limited.