1. Assume you are age 23, started employment on January 1, 2021, and that you are covered by a 401(k) plan.

Assume that your gross income for 2021, prior to any deduction for contributions to a qualified retirement plan, is $60,000.

Assume you put 8% of your income into the plan, in order to secure the 4% match from the employer.

Assume your taxable income is ($60,000 minus $4,800 401k employee contributions - $12,000 standard deduction) = $43,200.

1. Assume you reside in a state that has no state income tax. Assume you are married, can you also make a deductible contribution to a traditional IRA in 2021, if your spouse has taxable income of $176,800 in 2021, making your total combined taxable income $220,000 for the year? Why or why not?

YOUR ANSWER:

2. Assume you are married, SHOULD you also make a contribution to a Roth IRA in 2021, if your spouse has taxable income of $56,800 in 2021, making your total combined taxable income $100,000 for the year, and assuming you are a resident of the State of Kentucky, which has a state income tax? If not, what should you do instead?

YOUR ANSWER: