Q&A

Retiree can contribute to IRA

March 5, 2012 By Liz Weston

Dear Liz: I’m 64 and retired on a Social Security income of $10,000. My wife is also 64 and is still working, earning $91,000 a year. She contributes $13,000 to a 401(k). Can both of us also contribute the maximum $6,000 to our IRAs?

Answer: Since your wife has earned income, you both can contribute to IRAs, and you would be able to deduct your contribution. She, however, probably would be able to deduct only part of hers.

Because she’s covered by a retirement plan at work, her ability to deduct an IRA contribution for 2011 phases out at a modified adjusted gross income of between $90,000 and $110,000, said Mark Luscombe, principal analyst for tax research firm CCH, a Wolters Kluwer business. The portion of your Social Security benefits that are taxable would be added to her earned income to determine how much of her contribution is deductible.

“The working spouse would appear, therefore, based on the facts available, to only qualify for a partial deduction of her IRA contribution,” Luscombe said.

You’re luckier. As a non-working spouse, the phase-out range for deducting an IRA contribution is higher: In 2011, it applied to modified adjusted gross income between $169,000 and $179,000. “The non-working spouse would therefore, under these facts, qualify for a full deduction for a $6,000 contribution to an IRA,” Luscombe said.

How to stop collection calls

March 5, 2012 By Liz Weston

Dear Liz: About six months ago a debt collection agency started contacting me, by phone and the occasional letter, claiming that I have a past debt of about $20,000 that I owe to a bank card. I have never heard of this particular card or bank. I keep very accurate files, and I do not see this in my records. My credit scores hover around 720 to 740. How can I get them to stop contacting me?

Answer: If you don’t owe this money, send the collector a letter by certified mail, return receipt requested, stating that the debt isn’t yours and that you don’t want to be contacted again. It’s not unusual for a collection agency to dun the wrong person, and this may not be the end of it. Often, these poorly documented debts are resold, so you may have to tell the next collection agency the same thing.

If you did owe the money, you would want to tread more carefully. A collection agency would still have to honor a “do not contact me” letter, but sometimes these letters prompt the collectors to file lawsuits against debtors, said Gerri Detweiler, a credit expert with DebtCollectionAnswers.com. The collection agencies figure if they can’t negotiate payments with a borrower directly, they’ll use the court system to get the debtor to pay.