Roth IRAs

An explaination of Individual Retirement Accounts (IRAs).

Roth IRAs

What is a Roth IRA?
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.

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. 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
Year	Under Age 50	Over Age 50
2005	$4,000	$4,500
2006	$4,000	$5,000
2007	$4,000	$5,000
2008	$5,000	$6,000

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.

Am I eligible to make a full contribution?
Refer to the table below to determine if you are eligible to contribute the full amount for your filing status.

	Full Contribution if yoru AGI is less than:	Patrial Contribution if your AGI is between:
Single Filer	$95,000	$95,000-$110,000 No contribution if over $110,000
Married Filing Jointly	$150,000	$150,000-$160,000 No contribution if over $160,000

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 reached age 70 1/2, provided you have earned income.

Can I convert my traditional IRA to a Roth IRA?
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 attribuatel 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.

When can I withdraw from my Roth IRA?
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 59 1/2 OR,

the distribution is paid to a beneficiary due to your death.

the distribution is paid following your becoming permanently and totally disabled.

the distributionis 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 following exceptions apply:

you have reached age 59 1/2.
the distribution is paid to a beneficiary due to your death.
the distribution is paid following your becoming permanately and totally disabled.
the distribution is paid as part of a series of "substantially equal" periodic payments.
the distribution is used to pay for medical expenses in excess of 7.5% of your AGI.
the distribution is used to pay for health insurance premiums if you ahve been unemployed 12 or more weeks.
the 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.

Ordering rules dictate that distributions from a Roth IRA come first from:
1) Annual Contributions
2) Rollover Contributions on a frist in, first out basis (with the dollars there were includable in income as a result of conversion coming out before nontaxable dollars)
3) Post-Contribution earnings

What is the deadline for opening a Roth 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.

Must I contribute every year?
No. You are not required to contribute every year.

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.

Your savings federally insured to at least $100,000 and backed by the full faith and credit of the United States Government. NCUA a U.S. Government Agency.