Scott and Allison are married and file a joint tax return. Scott is s graduate student who worked part time and earned $15,000 in 2015. He is not eligible to participate in his employer’s retirement plan because he is a part-time worker. Allison is a high school teacher who earned $60,000 in 2015 and is an active participant in the school district’s retirement plan. Assume you are financial planner and the couple asks for your advice. Based on the preceding facts, answer each of the following questions.
A. Is Scott eligible to establish and deduct contributions to a traditional IRA? Explain your answer.
B. Is Allison eligible to establish and deduct contributions to a traditional IRA? Explain your answer.
C. Assume that Scott graduate and couple’s modified adjusted gross income is $130,00 in 2015. Both Scott and Allison participate in their employers’ retirement plans. Can either Scott or Allison, or both, establish a Roth IRA? Explain your answer.
D. Explain to Scott and Allison the advantages of Roth IRA over a traditional IRA.