Traditional IRAs

What is a 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.

Do I pay taxes on the earnings?
No, because all the earnings you accumulate in your IRA remain tax deferred until you make withdrawals from the account.

Am I eligible to contribute to an IRA?
Individuals who are under 70 1/2 years of age for the entire tax year and have earned compensation or received alimony may contribute to a traditional IRA.

How much can I contribute?
The amount qualified IRA owners are permitted to contribute in tax year 2005 has risen to $4,000. This amount will continue to gradually increase to $5,000 by 2008. 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. 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.

How much is deductible from my taxes?
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.

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 annual 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.

Must I contribute every year?
No. You can contribute any time, any amount or none at all.

What is the deadline for opening an IRA?
You can open or fund your IRA any time until your federal tax return is due. Normally, April 15 of the following year, excluding extensions.

When can I withdraw from an IRA?
You can withdraw funds from your IRA any time after you reach age 59 1/2. Distributions taken prior to age 59 1/2 are subject to a 10% early withdrawal penalty unless the distribution 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.
- 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 70 1/2. Failure to begin distributions at this point will impose penalties.

How are funds taxed at the time of distribution?
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. Consult your tax preparer.

If I die, what happens to my IRA?
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.

Is my IRA insured?
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.

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

*IMPORTANT NOTE- The information contained in this brochure is not intended to provide specific advice or recommendations for any individual. We recommend that you consult your attorney, tax or financial advisor with regard to your personal situation.