Traditional IRA

A Traditional IRA (An Individual Retirement Account other than a Roth IRA, SIMPLE IRA or Education IRA) is a special tax deferred savings plan authorized by the Federal Government to encourage you to accumulate money for retirement.

No, because all the earnings you accumulate in your IRA remain tax deferred until you make withdrawals from the account.

Individuals who are under 70½ years of age for the entire tax year and have earned compensation or received alimony may contribute to a traditional IRA.

Starting in taxable years after December 31, 2001, the amount qualified IRA owners are permitted to contribute annually to their IRAs will be gradually increased to $5,000. Additional catch up contributions can be made by qualified individual over fifty. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments.

You are permitted to annually contribute the following maximum amounts or 100% of your earned compensation and alimony; whichever is less:

Spousal IRA rules enable married couples filing jointly to contribute the maximum amount to their separate IRA accounts even if one spouse has little or no earned income. To qualify, their combined earned income must be equal to or greater than the total contributed amount.

If you and your spouse are not covered by an employer sponsored retirement plan, you will receive a full deduction regardless of your income. If you participate in an employer sponsored retirement plan, your income and filing status will determine the amount that your contribution is deductible from taxes. The following figures illustrate the increasing maximum income levels for single filers and couples filing jointly to deduct all or part of their IRA contributions.

Single Person Filing Individually

Married Couple Filing Jointly

Furthermore, an individual who does not participate in an employer plan, yet their spouse does, may deduct their regular IRA contributions provided their combined adjusted gross income level is below $150,000. They will be allowed a smaller maximum deduction if their combined adjusted gross income is greater than $150,000 provided it is not over $160,000.

No. You can contribute any time, any amount or none at all.

You can open or fund your IRA any time until your federal tax return is due. Normally, April 15th of the following year, excluding extensions.

You can withdraw funds from your IRA any time after you reach age 59½. Distributions taken prior to age 59½ are subject to a 10% early withdrawal penalty unless the distributions is:

• Made to a beneficiary due to the account holder’s death.

• Made to an account holder who has become permanently and totally disabled.

• Made as part of a series of “substantially equal” periodic payments.

• Used to pay medical expenses in excess of 7.5% of the account holder’s adjusted gross income.

• Used to pay health insurance premiums for participants unemployed 12 or more weeks.

• Up to $10,000 used for the first time purchase of a home.

• Used to pay for qualified higher education expenses.

Distributions must start by April 1 following the year in which the participant reaches age 70½. Failure to begin distributions at this point will impose penalties.

The amount withdrawn is included as taxable income, generally all deductible contributions and all earnings. If you have made nondeductible contributions, you will not have to pay tax on that portion. Be sure to discuss with your tax consultant.

The entire amount of your IRA will be paid to your beneficiary or beneficiaries. They can determine the manner in which the account is paid.

Yes. Our IRA investments are eligible for insurance by an agency of the Federal Government up to $100,000. All IRA accounts can be fully insured up to $100,000 separately from any other non-retirement accounts you may have with us.

Just come in and talk with us. One of our representatives can go over the benefits of an IRA and explain our investment programs.

A Roth IRA is an individual retirement account to which participants are able to make annual non-deductible contributions. Unlike a traditional IRA in which your earnings are tax-deferred, Roth IRA earnings can be tax free.

Starting in taxable years after December 31, 2001, the amount qualified IRA owners are permitted to contribute annually to their IRAs will be gradually increased to $5,000. Additional catch-up contributions can be made by qualified individuals over fifty. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments.

If you qualify, you are permitted to annually contribute the following maximum amounts or 100% of your earned compensation and alimony; whichever is less:

Maximum Contribution Limits

Spousal IRA rules enable married couples filing jointly to contribute the maximum amount to their separate Roth IRA accounts even if one spouse has little or no earned income. To qualify, their combined earned income must be equal to or greater than the total contributed amount.

Refer to the table below to determine if you are eligible to contribute the full amount for your filing status:

Involvement in an employer sponsored retirement plan such as a 401(k) or pension plan does not affect your ability to contribute to a Roth IRA, provided you meet the above income guidelines.

With a Roth IRA, unlike a traditional IRA, you can continue to make contributions even after you have earned income.

You may, provided you are a Single filer or married couple filing jointly with a modified adjusted gross income that does not exceed $100,000. Any portion of the converted amount attributable to deductible contributions and earnings must be included as taxable income. The entire taxable amount of the conversion must be included as income for the year the conversion is made.

You may withdraw your Roth IRA contributions at any time, without tax and penalty free. “Qualified distributions” may be withdrawn tax and penalty free. “Non-qualified” distributions may be taxable and subject to an IRS 10% early distribution penalty.

To be considered a “qualified distribution,” the following characteristics MUST apply:

You have been a participant in the Roth IRA for over five years, beginning with the first year in which the account was converted or a contribution was made. AND…

• You have reached age 59½ OR,

• The distribution is paid to a beneficiary due to your death.

• The distribution is paid following your becoming permanently and totally disabled.

• The distribution paid to you for the first time purchase of a home up to $10,000.

The 10% IRS early withdrawal penalty will not apply to “non-qualified” distributions to which one or more of the follow exceptions apply:

• You have reached age 59½

• The distribution is paid t a beneficiary due to your death.

• The distribution is paid following your becoming permanently and totally disabled.

• T he distribution is used to pay for medical expenses in excess of 7.5% of your AGI.

• T he distribution is paid as part of a series of “sub-stantially equal” periodic payments.

• The distribution is used to pay for health insurance premiums if you have been unemployed 12 or more weeks.

• T he distribution is used for the first time purchase of a home, up to $10,000.

• The distribution is used to pay for qualified higher education expenses.

Formerly known ad Education IRAs, Coverdell Education Savings Accounts are an ideal way for you to begin saving money to help a child, Grandchild, or any young person you know pay for higher education expenses down the road.

Contributions to a Coverdell Education Savings Account are not tax-deductible, but distributions used to pay for the qualified education costs of the named beneficiary are generally tax free.

You can contribute up to $2,000 annually per beneficiary below the age of 18, provided you meet the following income limits:

Beneficiaries are limited to receiving a total of $2,000 in contributions to one or more Coverdell Education Savings Accounts annually, regardless of the contributors’ limits. Your contributions to a Coverdell Education Savings Account are separate from contributions made to a traditional or Roth IRA and therefore may be made in addition to your contribution limits for those types of accounts.

Corporations and other entities, including tax-exempt organizations, are permitted to make contributions to Coverdell Education Savings Accounts regardless of the income of the corporations or entity in the year of the contribution.

You may continue to contribute to the account until the named beneficiary reaches the age of 18. No contributions may be made to the account after that time. If the beneficiary qualifies as a special needs beneficiary, you may continue to make contributions to their account after they reach 18 years of age.

Distributions from a Coverdell Education Savings Account which are used to pay for the “qualified education expenses” of the beneficiary are tax-free.

Qualifying expenses include:

• Expenses incurred in connection with the enrollment or attendance of the beneficiary at a public, private or religious school providing elementary or secondary education.

These expenses include tuition, fees, academic tutoring, special needs services, books, supplies and other equipment. Also included are expenses associated with room and board, uniforms, transportation and supplementary items and sercies such as extended day programs. Computer technology, equipment and Internet access and related services may also be paid tax-free from the account, if these items are to be used by the beneficiary or their family during that beneficiary’s period of schooling.

• Post-secondary tuition, fees, textbooks, supplies and equipment.

• Post-secondary room and board expenses. (Only if the beneficiary is enrolled on at least a half-time basis at an eligible institution.)
  Any amount of the distribution in excess of the qualified expenses, which is not attributable to contributions, will be taxed as earned income.

If the beneficiary does not use the earnings for qualified education expenses, the funds may be rolled over to certain qualified family members of the beneficiary. The funds from a Coverdell Education Savings Account must be received by the time the beneficiary reaches age 30. If the funds have not been distributed or rolled over by that time, the earnings will be taxable and subject to a 10% IRS penalty tax.

This distribution rule does not apply in event that the beneficiary qualifies as a special needs beneficiary.

No. You are not required to contribute each year.

Individuals may make contributions the tax year no later than the tax filing deadline for that tax year: generally April 15.