IRAs

An Individual Retirement Account makes a lot of sense when planning your retirement or your investment future.

Your Social Security benefits and pension are not intended to provide all of your retirement income. And planning ahead to pay for an education, or to buy a house, or any future goal is always wise.

Today's IRAs provide more tax benefits and greater earnings than in previous years. You can choose from taking advantage of yearly tax deductions now, or save your tax breaks for future withdrawals. How you want to pay your taxes determines your IRA choice.

You can choose from or build a series of IRAs:

View Disclosures


Traditional IRAs (Individual Retirement Accounts)

An IRA account holder with earned income may make yearly contributions up to the age of 70. Some individuals receive a non-refundable tax credit for contributions. Contributions to Traditional IRAs may or may not be deductible. Regardless of whether or not an IRA deduction is received for the contribution, the earnings generated on contributions to Traditional IRAs are tax-deferred. IRA holders do not include earnings from Traditional IRAs in income until the year a distribution is taken.

Traditional IRAs

Plan

Funded By

Contribution Limits

Growth

Distributions

Traditional IRA
Individual for self
$5000 per year. Additional $1000 catch-up contributions for those attaining the age of 50 before the end of the taxable year. Some contributions deductible.
Tax-deferred
Distributions generally taxable. Seek competent tax advice.
Traditional SEP IRA
Employer on behalf of employee And/Or Individual for self
The lesser of $45,000 or 25% of the employee's compensation from employer and/or $5000 from employee(catch-up contribution also available). Employer deductible contributions.
Tax-deferred
Distributions generally taxable. Seek competent tax advice.
Traditional Rollover IRA
Rollovers from qualified plans
Assets received from qualified plans.
Tax-deferred
Distributions generally taxable. Seek competent tax advice.

2008 IRA Deductibility Phase-out Ranges For Active Participants

Tax Year

Single Filer MAGI
Married, Filing a Joint Tax Return, MAGI
2008
$53,000 - $63,000
$85,000 - $105,000

While there are numerous benefits to opening a Traditional IRA, a Roth IRA is an option for those who wish to receive tax-free qualified distributions. Unlike a Traditional IRA, Roth IRA contributions use after-tax dollars and income limitations apply.


Roth IRAs (Roth Individual Retirement Account)

Anyone, regardless of age, who has earned income that does not exceed the limits set by Congress, can contribute to a Roth IRA. All contributions to a Roth IRA are made with after-tax dollars, grow tax-deferred and may be withdrawn tax-free; therefore no tax deduction may be taken. Unlike a Traditional IRA, contributions can be made past the age of 70. Regardless of age, you have access to all contributions (excluding earnings) tax-free, and without penalty unless they are conversion contributions (without a 72T exception) which are subject to a 10% penalty. In order to receive tax-free and penalty-free distributions on both your contributions and earnings, distributions must be considered "qualified distributions."

Roth IRAs

Plan

Funded By

Contribution Limits

Growth

Distributions

Roth IRA
Individual for self $5000 per year
Additional $1000 catch-up contributions for those attaining the age of 50 before the end of the taxable year. Nondeductible contributions.
Tax-deferred
Tax-free qualified distributions. Seek competent tax advice.

MAGI (Modified Adjusted Gross Income) Limits for Roth IRA Contribution Eligibility
Single
Up to $99,000 for tax year 2007
$99,000 - $114,000 for tax year 2007
Joint (married filing joint return)
Up to $156,000 for tax year 2007
$156,000 - $166,000 for tax year 2007

If you're ineligible for a Roth IRA due to income limitations or if you're interested in making contributions that may be tax-deductible, a Traditional IRA might be a better solution.

Talk to your accountant or tax preparer about your Roth IRA options, then come and see us. We are your Roth IRA source.


Education IRA

Education IRA

Coverdell Education Savings Accounts ("ESA")

Contribution limits (lesser of chart numbers, or 100% of an individuals compensation)

2,000* per Child

Age limit on contributions

Under Age 18

Phase Out Ranges for those who can make the maximum deductible non-deductible contributions.

Contributor's MAGI

(See your tax Advisor)

Single Phase Out

 

$95,000 to $110,000

 

Joint Phase Out

 

$190,000 to $220,000

 

[IRC Section 530]

Contribution tax-deductible?

NO

(See your tax Advisor)

Distributions for qualified expenses are federally tax free as of 2002 (see below).

Can convert to ROTH IRA?

No

Can convert to Education IRA?

Can be transferred to another Education IRA at another company for same child. Can also be transferred to another family member.

Can convert to Traditional IRA?

No

When is disbursement penalized?

10% penalty on earnings if not used for elementary, secondary or college education, or if not used by Age 30 (death or disability exempted).

When is disbursement mandatory?

Before age 30 - Within 30 days of age 30 and/or death

Contribution Deadline

By April 15th of following year

Education IRA

Coverdell Education Savings Account ("ESA")

A Coverdell Education Savings Account ("ESA") , formerly and still more widely known as an "Education IRA", is a trust or custodial account created exclusively for the purpose of paying the "qualified education expenses" of a specified living beneficiary; hence, a College Savings Plan. These Plans began accepting contributions as of January 1, 1998, and from then through 2001 only allowed for a maximum contribution of up to $500. As of 2002 that contribution is increased as shown in the above chart. Education IRAs can also accept contributions by corporations, tax-exempt organizations, and other entities.

Covered, "eligible expenses", were expanded in 2002 to include costs for grades K1-K12, public, private, religious, and college, and include such "qualified higher education, elementary & secondary education expenses" as: tuition, fees, books, supplies, equipment required for enrollment or attendance, computer and software used during attendance (non game, hobby or sports), tutoring, extended day programs (as required or provided by the institution), computer equipment, special needs services, room & board if at least a half-time student (at the schools posted room rate, otherwise limited to $2,500 for students living off campus, and not at home), uniforms & extended day program costs, and also contributions made to a qualified state tuition program.

Taxation Issues Regarding - Contributions, Earnings & Distributions:

Account Beneficiary Flexibility:
The question often arises "may the designated beneficiary of the account be changed from one child to another, or to some other party without triggering a tax?" The answer is YES!

The restrictions on this are that it may be done but only with or for "Account Beneficiaries" that are defined as - "qualified family members"; namely, spouse, child, stepchild, daughter-in-law, son-in-law, mother, stepmother, mother-in-law, father, stepfather, father-in-law, sister, half sister, stepsister, sister-in-law, brother, half brother, stepbrother, brother-in-law, aunt, uncle, niece, nephew, first-cousin, or the spouse of any of the foregoing.


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