|
IRAs
Legislation has changed the contribution limits of Individual Retirement
Accounts (IRAs) making them even more attractive when planning your
retirement or your investment future. Key changes are indicated below.
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.
Traditional IRA
Choose A Traditional IRA for long term retirement planning.
You don't pay taxes now on these retirement accounts, when your
income is high.
At retirement, you are able to take out your funds or roll them
over into another option. Taxes paid then are considerably less,
since your income will be less.
Here are some facts about Traditional IRAs:
- You must be under age 701/2 to be eligible for a traditional
Nondeductible IRA.
- Non-working spouses can now make fully deductible contributions
to an IRA, even if their spouse participates in a retirement program,
as long as their joint income does not exceed $150,000.
- You may be able to withdraw money before age 591/2 without a
penalty to purchase a first home (up to $10,000 maximum) or pay
qualified costs of higher education.
- Each wage earner's annual contribution to an IRA can be $2,000
or 100 percent of earned income, whichever is less. In a family
with a nonworking spouse, the couple may be eligible to deposit
up to $4,000. The limit will depend upon earned income and tax
filing status. Check with your tax preparer for more information.
- Interest earned on an IRA is tax-deferred until you withdraw
the funds, which become available when you reach age 591/2 you
must begin to withdraw at age 701/2 or face an Internal Revenue
excise tax penalty.
- Early withdrawal may incur a substantial interest penalty.
Contribution Changes:
- Traditional and Roth IRA limits will change as follows:
2002-2004: $3,000
2005-2007: $4,000
2008 and thereafter $5,000 (indexed beginning in 2009)
Catch-up Contributions
- IRA holders 50 and older may contribute an amount in excess
of the above limits as follows:
2002 - 2005: $500
After 2006: $1,000
Roth IRA
If you know you will need your money sooner than retirement, consider
the Roth IRA.
Savings for a down payment on a house or other expenditure will
add up to more with the higher interest paid on a Roth IRA. While
you will have to pay taxes on the funds now, you will be saved those
taxes when you use the money, and you do not incur any penalties
for withdrawal after 5 years.
Here are some key elements of the Nondeductible Roth IRA:
- Penalty free withdrawals after 5 years
- Tax free earnings after age 591/2
- Contributions allowed after age 701/2; when employed
- No required distribution at age 701/2 or in your lifetime
- Tax-free if used for first home purchase (up to $10,000) or
education
- Tax-free if disabled or upon death
Talk to your accountant or tax preparer about your Roth IRA options,
then come and see us. We are your Roth IRA source.
Coverdell Education Account*
This is a great opportunity
to save toward the costs of a higher education. Best of all, it's
available to everyone: parents, grandparents, other relatives, friends,
and even minors (with earned income) can set up an account for any
designated beneficiary under age 18. You can make nondeductible
contributions of up to $500 per child each tax year. The accumulation
of interest and withdrawals are tax-free as long as the funds are
used for qualified, higher education costs.
If the beneficiary is not going to use the money for education
expenses, it must be withdrawn by age 30. The Coverdell Education
Account can be rolled over into another child's account in the same
family. The contributions to this account do not count toward your
$2,000 single taxpayer or $4,000 married taxpayer (filing jointly)
IRA contributions. You can save for a child's education and maximize
your own IRA every tax year.
*Formerly the Educational IRA.
IRA Share Certificate
Share Certificates are also available as IRA investments.
An IRA Share Certificate offers a higher yield over fixed terms
ranging from 3 months to
5 years. You can open one with a minimum investment of
$500.00.
We also offer JUMBO IRA
Certificates for a term of 1?4 months, with a minimum investment
of $50,000.
When planning your retirement or investment future, be sure to
consider these higher yield certificates. They can be rolled over
at the end of their term into other IRA options, so start planning
now.
Remember that early withdrawals do incur penalties.
For more information about IRAs, speak to your financial advisor.
Contact us to open your IRA today and
start saving for tomorrow.
|
