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IRA
Am I Eligible for a Roth IRA?


What Is Compensation?

How Much Can I Contribute to My IRA?

Do I Pay Taxes on the Earnings of My IRA?


Do I Get a Tax Deduction for My Contribution?

What if I'm Not Eligible for a Deductible IRA Contribution?


When Can I Withdraw Funds From My IRA Without Incurring Any IRS Penalties?

How Are the Funds Taxed at Distribution?


What Happens to My IRA in the Event of My Death?

What Is a Spousal IRA?

How Do I Move Funds From one IRA to another?

How Do I Move Funds From a Qualified Plan (QP) or Tax-Sheltered Annuity (TSA) to an IRA?

When Is the Contribution Deadline for Funding a Roth IRA?


How Do I Open a Roth IRA?


Basic Rules for Determining IRA Deductibility

Allowable IRA Deductions for Single Filers Who Are
Active Participants

Computing Your Maximum Deductible Contribution

Traditional IRA / Roth IRA
Coverdell Educational Savings Account
________________________________________

Which IRA Is Right for You?
Discover the Benefits of a Roth IRA
Straight Answers to Your IRA Questions
Rollovers, Direct Rollovers, and Transfers

Am I Eligible for a Roth IRA?
If you are under age 70 1/2 for the entire tax year and have compensation, you are eligible to establish an IRA, even if you already participate in any type of government plan, tax-sheltered annuity, simplified employee pension (SEP) plan, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE), or qualified plan (pension or profit sharing) established by an employer.

What Is Compensation?
Compensation is the salary or wages you receive as an employee. If you are self-employed, compensation is your net income for personal services performed for the business. All taxable alimony is considered compensation. Interest, dividends, and most rental income is passive income and is not considered compensation.

How Much Can I Contribute to My IRA?
You may contribute any amount up to 100 percent of your compensation or $2,000, whichever is less, to a traditional IRA (or to both a traditional and a Roth IRA).

Do I Pay Taxes on the Earnings of My IRA?
All earnings on your IRA contributions (deductible and / or nondeductible) remain tax deferred until you make withdrawals from the account.

Do I Get a Tax Deduction for My Contribution?
Deductibility of your contribution is based on whether or not you or your spouse are an active participant in an employer-maintained retirement plan. If you are single and not an active participant, you are eligible for a full deduction no matter how large your income. If you are not an active participant, you are eligible for a full deduction no matter how large your income. If you are not an active participant but your spouse is, you are still eligible for a full deduction if you file jointly and your combined modified adjusted gross income (MAGI) is below $150,000 or partial deduction if your MAGI is between $150,000 and $160,00. If you are an active participant, the deductible amount is dependent on your MAGI and income tax-filing status. You may be eligible for the maximum deduction, a partial deduction, or no deduction.

What if I'm Not Eligible for a Deductible IRA Contribution?
You can still make nondeductible contributions to your IRA. You may also be eligible for a Roth IRA.

When Can I Withdraw Funds From My IRA Without Incurring Any IRS Penalties?
You can withdraw funds from your IRA without the 10 percent IRS premature-distribution penalty and time after you reach age 59 1/2. You can also avoid the premature-distribution penalty before age 59 1/2 if you become disabled or die, if the distributions are part of certain periodic payments, for medical expenses in excess of 7.5 percent of your adjusted gross income, for health care insurance if you've been receiving unemployment compensation for at least 12 weeks, for qualified higher education expenses, or for a first-time home purchase. When you reach age 70 1/2, you must begin to take your minimum required distributions or severe penalties will be due.

How Are the Funds Taxed at Distribution?
If you are over age 59 1/2, simply include the taxable portion of the amount withdrawn (generally, deductible contributions and all earnings) as income. However, if you are under age 59 1/2 and do not meet one of the exceptions, you must also pay a 10 percent IRS penalty for premature distribution. The nondeductible portion of the distribution is not taxable when withdrawn, nor is it subject to the 10 percent premature-distribution penalty.

What Happens to My IRA in the Event of My Death?
Your named beneficiary (ies) will receive the entire proceeds of your Roth IRA. Your beneficiary (ies) will not be subject to the IRS 10 percent premature-distribution penalty. The manner in which your beneficiary (ies) receives the funds is determined by the election made by your beneficiary (ies) within the guidelines of the law.

What Is a Spousal IRA?
The spousal IRA rules allow a married person to make an IRA contribution for his / her spouse. A married couple can contribute up to 100 percent of their combined earned incomes or $4,000, whichever is less. The amounts can be divided in any manner between the two IRAs, as long as no more than $2,000 is contributed to either IRA.

How Do I Move Funds From one IRA to another?
There are two methods you can use to move funds from one IRA to another: rollover and transfer. For a rollover, you have 60 calendar days from the date of receipt to roll over the distribution to another IRA. Rollovers from IRAs may not occur more than once during a 12-month period (this rule applies to each separate IRA you own). A transfer occurs when the funds are moved from one IRA to another without you having control or custody of the funds. There are no time or frequency limits on the number of transfers permitted.

How Do I Move Funds From a Qualified Plan (QP) or Tax-Sheltered Annuity (TSA) to an IRA?
An eligible QP or TSA distribution may be a direct rollover or a rollover into an IRA. Generally, an eligible rollover distribution is any distribution except on that is (1) one of a series of substantially equal periodic payments over the single or joint life expectancy of the employee and beneficiary, or for a specified period of ten years or more, (2) a required distribution for a retired employee age 70 1/2 or older, (3) a distribution of assets that have already been taxed, and (4) a hardship distribution received after December 31, 1998.

A rollover occurs when funds distributed from your QP or TSA are paid directly to you then subsequently rolled over by you into an IRA within 60 days.

A direct rollover is a QP or TSA distribution that is issued directly to an IRA by the plan administrator (employer).

QP and TSA distributions paid directly to you are subject to a mandatory 20 percent federal income tax withholding at the time of distribution.

Funds moved to an IRA via a direct rollover are not subject to withholding.

As with an IRA-to-IRA rollover, a QP or TSA recipient has 60 calendar days from the date of receipt to roll over the taxable portion of the distribution to an IRA. The 12-month limitation does not apply to rollovers from a QP or TSA into an IRA.

When Is the Contribution Deadline for Funding a Roth IRA?
IRAs for the taxable year can be opened and funded any time between the first day of your tax year and the date your tax return is due for the year, excluding extensions. This is normally April 15 of the following year.

How Do I Open a Roth IRA?
Simply see any of our IRA representatives. We will explain the nature of these accounts in more detail and help you complete the simple forms necessary to establish your IRA.

Basic Rules for Determining IRA Deductibility:

  • If you are single and are not an active participant in an employer-maintained retirement plan, you are eligible for a full deduction no matter how large your income.
  • If both you and your spouse are active participants or if you are single and an active participant, you may be eligible for either a full or partial deduction depending on your modified adjusted gross income (MAGI).
  • If you are not an active participant but your spouse is and you file a joint federal income tax return, you are eligible for a full deduction if your joint MAGI is less than $150,000. You qualify for a partial deduction if your joint MAGI is between $150,000 and $160,000.
  • The tables below demonstrate the income limits for deductibility and the way the Taxpayer Relief Act of 1997 increases them.

Allowable IRA Deductions for Single Filers Who Are
Active Participants:


Tax Year Full Deduction for
a MAGI of:
Partial Deduction for a MAGI Between: No Deduction for a MAGI of:
1997 $25,000 or less $25,000 - $35,000 $35,000 or more
1998 $30,000 or less $30,000 - $40,000 $40,000 or more
1999 $31,000 or less $31,000 - $41,000 $41,000 or more
2000 $32,000 or less $32,000 - $42,000 $42,000 or more
2001 $33,000 or less $33,000 - $43,000 $43,000 or more
2002 $34,000 or less $34,000 - $44,000 $44,000 or more
2003 $40,000 or less $40,000 - $50,000 $50,000 or more
2004 $45,000 or less $45,000 - $55,000 $55,000 or more
2005 $50,000 or less $50,000 - $60,000 $60,000 or more

Allowable IRA Deductions for Joint Filers Who Are
Active Participants:


Tax Year Full Deduction
for a MAGI of:
Partial Deduction for a MAGI Between: No Deduction for a MAGI of:
1997 $40,000 or less $40,000 - $50,000 $50,000 or more
1998 $50,000 or less $50,000 - $60,000 $60,000 or more
1999 $51,000 or less $51,000 - $61,000 $61,000 or more
2000 $52,000 or less $52,000 - $62,000 $62,000 or more
2001 $53,000 or less $53,000 - $63,000 $63,000 or more
2002 $54,000 or less $54,000 - $64,000 $64,000 or more
2003 $60,000 or less $60,000 - $70,000 $70,000 or more
2004 $65,000 or less $65,000 - $75,000 $75,000 or more
2005 $70,000 or less $70,000 - $80,000 $80,000 or more
2006 $75,000 or less $75,000 - $85,000 $85,000 or more
2007 $80,000 or less $80,000 - $100,000 $100,000 or more

Allowable IRA Deductions for Married Individuals Filing Separately Who Are Active Participants:

Tax Year Full Deduction
for a MAGI of:
Partial Deduction for a MAGI Between: No Deduction for a MAGI of:
All years No full deduction $0 - $10,000 $10,000 or more

WORK SHEET
Computing Your Maximum Deductible Contribution

Deduction Formula:

A. Insert the high-end modified adjusted gross income (MAGI) limit for the corresponding tax year (from table above)

$__________
B. Insert your MAGI

$__________
C. Subtract B from A

$__________
Line C multiplied by .2 equals the amount you may deduct**

x .2***
Deductible amount****

$__________

Example: Jim wants to make a deductible IRA contribution in tax year 2001. Jim is married, files jointly, and has an MAGI of $58,000.

A.
$63,000
B.
$63,000
C.
$ _ 3,000
____ x.2
$ _ 1,000 deductible contribution

*AGI from IRS Form 1040 or Form 1040A, but modified (changed) by figuring it without taking any:

(a) IRA deduction
(b) Foreign earned income exclusion
(c) Foreign housing elusion or deduction
(d) Exclusion of Series EE bond interest shown on Form 8815

**If the adjusted dollar deduction limit is not a multiple of ten, it is rounded up to the next highest $10 increment. If your partial deduction is less than $200 but greater than $0, you are allowed to claim an IRA deduction of $200. The allowable deduction cannot exceed 100 percent of earned income.

***For married couples filing jointly, replace the .2 with .1 for years starting in 2007

****This assumes that you are eligible to contribute that amount. (The amount may need to be reduced if you made a Roth IRA contribution.)

All information contained herein is intended to act as a guide in giving you an estimate of the deductible amount of your contribution. Contact you tax adviser for further information.

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This information is effective for tax-year 2006 and thereafter. This information is intended to provide general information concerning IRAs. It is not intended to provide legal advice or to be a detailed explanation of the regulations covering these accounts or how they may apply to your individual circumstances. For specific information, you are encouraged to consult your tax or legal professional. IRS Publication 590, individual Retirement Arrangements, and the IRS' web site, www.irs.gov , may also provide helpful information.

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