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Chapter 21. No 401(k)? No Problem! > Traditional IRAs - Pg. 216

No 401(k)? No Problem! 216 If you or your spouse are an active participant in an employer-sponsored retirement plan, the max- imum IRA deduction is phased out. In 2001, the limit for married taxpayers filing jointly is phased out between $53,000 and $63,000 of annual gross income (AGI), and for single taxpayers between $33,000 and $43,000 of AGI. The AGI phaseout limits for making deductible IRA contributions will increase every year through 2007. (See the table in Chapter 9, "IRAs Versus 401[k]s--Which Is Better?" for more information.) Our Advice Anyone with earned income can contribute to an IRA. If you have a teenager who has earned income, help him set up an IRA. You may have to bribe him by offering to supplement his spending money, but the effort is worth it. If he starts at 18 and contributes $1,000 annually to an IRA (assuming a 9 percent return), when he retires at 67, he could have almost three quarters of a million dollars. Currently, there are some hardship rules for IRAs where you can get at your money without incurring that ubiquitous 10 percent penalty if you are under the age 59½. If you become disabled or have very large medical expenses, or if you are unemployed and use the distribution to pay premiums for health insurance, the medical and dental expenses must be in excess of the 7.5 percent floor for your deductible medical expenses. The health insurance premium exception is allowed only if