What is an IRA?

An Individual Retirement Account (IRA) is a special savings plan authorized by the Federal government to help you accumulate funds for your retirement.

Who is eligible to contribute to an IRA?

Every individual who has earned income or received alimony may contribute to an IRA. Income from other sources such as investments or inheritances does not qualify. Contributions may not be made for or after the year in which you reach age 70½.

I am an active participant in an employer-sponsored retirement plan. May I deduct IRA contributions?

Your IRA contribution may still be fully or partially deductible, depending on your income level.

Are IRA earnings, such as interest and dividends, tax-deferred?

All the earnings you accumulate in your IRA remain tax-sheltered until withdrawn.

Must I contribute the full amount each year?

No. You can contribute any amount your budget allows, either in one or more contributions. In fact, if you choose, you need not make any contributions in a given year.

When can I make withdrawals?

Withdrawals (distributions) are permitted any time after age 59½, but must start by April 1st following the year in which the participant reaches the age of 70½. After age 59½, you may make withdrawals even if vou continue to earn income. It is not necessary to be retired in order to make withdrawals.

Can I make earlier withdrawals?

There is a 10% penalty for withdrawing all or any part of the acccount before age 59½, with the following exceptjons:

• in the event of death or total disability.
• you may withdrawal nondeductible contributions (earnings on these contributions will be taxable).
• as a qualified first-time homebuyer you may withdraw up to $10,000 during your lifetime. It must be use within 120 days to pay costs (including reasonable settlement, financing or other closing costs). This exception is available for expenses of the individual, spouse, child, grandchild, or ancestor of such individual or spouse.
• if you use the withdrawal to pay qualified higher-education expenses.
• if you lise the withdrawal to pay for medical expenses in excess of 7.5% of your adjusted gross income or to purchase health insurance after receiving unemployment compensation for more than 12 weeks.
• if the funds ard pald out in a series of payments made over your life expectancy (or the joint life expectancy of you and your beneficiary.

When are taxes paid on IRAs?

When you begin making withdrawals, you will be taxed on only the amount you withdraw each year on which taxes have not previously been paid. The remaining funds continue to accumulate tax-deferred earnings. In all probability, you will benefit by the fact that you will be in a lower tax bracket than at the time you made your contribution.

What is the deadline for contributing to an IRA?

You can open or make contributions to your IRA any time up to and including the due date of your tax return for the previous tax year, normally April 15th.

IRA deductions for active participants in employer-sponsored retirement plans

If you are an active participant in an employer-sponsored pension or profit-sharing plan, your IRA contribution deduction will depend on your level of adjusted gross income. Active participants below a "threshold level" of income may make deductible IRA contributions. Active participants with incomes above the phaseout limit are not entitled to any IRA deduction.

How much can I contribute to an IRA?



You can contribute all or part of compensation, up to:

• Individual Taxpayer - $5,000
• Married Taxpayer - $10,000 where both spouses have earned income (each spouse can contribute up to $5,000 each).
• Spousal IRA - $10,000 for married taxpayers filing jointly where one spouse has little or no income. (Yearly contributions may be divided between the accounts, provided the total contribution does not exceed $10,000 and neither account is allocated more than $5,000).

Total yearly contribution that can be made by an individual to all IRAs, Traditional (deductible, nondeductible) and Roth IRAs, is $5,000 not counting rollover contributions.

"CATCH-UP" contributions for people 50 and older

To make up for lost time, workers 50 and older before the end of the taxable year can make additional contributions above the new maximum limits as follows:

• $1,000 a year· (year 2009 & 2010)

Income Levels For IRA Deductibility Phaseout For Active Participants In Employment Sponsored Retirement Plans







* Adjusted Gross Income is your taxable income from all sources including taxable Social Security benefits and adjustment for passive loss limitations.

** If you are eligible for a deduction and this amount is less than $200, you may still deduct $200 from your taxes. If this amount is $200 or more, deduct this amount (you must round up to the nearest $10).

I am not an active participant in an employer-sponsored retirement plan. May I deduct IRA contributious?

If you are not an active participant in an employer-sponsored pension or profit-sharing plan, you can deduct 100% of your IRA contribution regardless of income level. If your spouse is an active participant and your joint income is $166,000 in 2009 or $167,000 in 2010, you cannot fully deduct your IRA contribution.

Partial deductions are permitted for joint incomes between $166,000 and $176,000 in 2009 or $167,000 and $177,000 in 2010.

What Is A Roth IRA?

A Roth IRA is a special savings plan authorized by the Federal government to help you accumulate funds for your retirement. Contributions are non-deductible but all withdrawals, including earnings, are tax-free if the account has been open for five years and the account holder is 59½ or older.

Who Is Eligible To Contribute To A Roth IRA?

Every individual who has earned income or received alimony may contribute. Income from other sources,such as investments or inheritances does not qualify. The accounts are available to couples with a modified adjusted gross income (MAGI) of up to $166,000 and singles up to $105,000. For 2009, contributions are phased out between $166,000 and $176,000 for couples and $105,000 to $120,000 for singles. In 2010, couples with modified adjusted gross income of up to $167,000 and singles up to $105,000 are eligible to contribute to a Roth IRA. Contributions are phased out for couples between $167,000 and $177,000 and $105,000 and $120,000 for singles.

I am an active participant in an employer-sponsored retirement plan, may I contribute to a Roth IRA?

The fact that you participate in an employer-sponsored retirement plan does not exclude you from making a non-deductible contribution to a Roth IRA.

Are Interest & Dividend Earnings Tax-Deferred?

All the earnings you accumulate in your IRA remain tax sheltered and if they remain in the account for a period of five successive tax years they can be withdrawn tax-free. There are certain criteria that must be met to enjoy tax-free and penalty-free distributions.

Must I contribute the full amount each year?

No. You can contribute any amount your budget allows, either in one or more contributions. In fact, if you choose, you need not make any contributions in a given year.

When Can I Make Withdrawals?

Penalty-free and tax-free withdrawals of your contributions are permitted at any time (until total distributions from all Roth IRAs exceed the contribution amount - no distribution is subject to either taxation or penalty). Tax-free withdrawals of earnings are permitted after age 59½, in the event oI death or total disability, or as a qualified first-time home buyer (up to $10,000). In order to be tax-free they must have remained in the account for a period of five successive tax years. There is no mandatory age requirement for distributions and funds may remain in the account during the account owner's lifetime.

Is There A Penalty For Early Withdrawais?

There could be a 10% penalty for withdrawing all or any part of the earnings. Taxable distributions are not subject to the 10% early withdrawal penalty if the individual is 59½, dead, disabled, or if taking equal period payments over his or her life expectancy for at least five years or until age 59½, whichever comes later, or for college expenses, first-time home purchase up to $10,000, certain medical expenses, and certain other uses.

When are taxes paid on Roth lRAs?

Taxes are never paid on the original contributions which are not tax deductible in the year of your contribution. Taxes must be paid on all withdrawal of earnings which have not remained for a period of five successive tax years.

Can funds be rolled over from one Roth IRA to another Roth IRA?

Yes, you may transfer or rollover from one Roth lRA to another Roth IRA tax-free and regardless of your adjusted gross income.

If I contribnte to a Roth IRA, will it affect the amount that I can contribute to my employer-sponsored retirement plan?

No. The amount you contribute to your employer sponsored plan will not be affected by your Roth IRA contribution.

Can My Roth IRA Be Inherited?

Yes. when you die, the entire proceeds can be passed on tax-free to your beneficiaries, providing your Roth IRA meets the five-year test.

How much can I contribute to a Roth IRA?



You can contribute all or part of compensation, up to:

• Individual Taxpayer - $5,000
• Married Taxpayer - $10,000 where both spouses have earned income (each spouse can contribute up to $5,000 each).
• Spousal IRA - $10,000 for married taxpayers filing jointly where one spouse has little or no income. (Yearly contributions may be divided between the accounts, provided the total contribution does not exceed $10,000 and neither account is allocated more than $5,000).

Total yearly contribution that can be made by an individual to all IRAs, Traditional (deductible, nondeductible) and Roth IRAs, is $5,000 not counting rollover contributions.

"CATCH-UP" contributions for people 50 and older

To make up for lost time, workers 50 and older before the end of the taxable year can make additional contributions above the new maximum limits as follows:

• $1,000 a year· (year 2009 & 2010)

What is the deadline for contributing to a Roth IRA?

You can open or make contributions to your Roth IRA any time up to and including the due date of your tax return for the previous tax year, normally April 15th.

Can I convert a traditional IRA to Roth IRA?

A Traditional IRA may be converted to a Roth IRA using special rules.

Guidelines for a conversion are as follows:

• You must take a distribution from your traditional IRA and complete the rollover within 60 days.
• The IRS will treat as income any sums that would have been taxable. Make sure to get all the facts to see if it will be fiscally worth it to cornvert.
• A separate Roth IRA should be used for the converted IRA amounts. These amounts must be accounted for a period of five years following the rollover.

Important: You will have to pay tax on the transferred amount. Your tax advisor can help explain how to calcuIate it.

Is there a deadline for conversion?

Yes, December 31 of the current year is the deadline for conversion in any given year, NOT April·15 of the following year (as is the case when funding a Traditional or Contributory Roth IRA). It's best to submit a conversion request by December 15 to allow time for the conversion to be processed.