Major
changes in IRA rules will make a good thing better for more members
than ever before!
Fast Facts about the new Roth IRA
- Expanded Availability -
The Roth IRA is open to those with Adjusted Gross Incomes (AGIs) as
high as $160,000 for married couples, $110,000 for singles...nearly 4
times higher than for traditional IRAs.
- Tax-free Distributions - While contributions
are not tax deductible, contributions and interest can be withdrawn
tax-free. You pay 0% capital gains!
- Flexible Withdrawal Rules - You are not
required to begin taking required minimum distributions after reaching
age 70 1/2 (as with traditional IRAs), and penalty-free withdrawals
are permitted in the event of death or disability, qualified medical
expenses, certain health insurance, first time home purchase (up to
$10,000), qualified educational expenses or due to an IRS levy
(provided the account has been in existence for 5 years).
- No Age Restrictions - Contributions to a Roth
IRA can continue past age 70 1/2, unlike traditional IRAs.
The "Old" IRA has some
other new looks too!
- Coverdell ESA (formerly Education IRA) -
Allow you to put away up to $2,000 per year per child for higher
education expenses, paying 0% capital gains tax upon withdraw.
- Education benefit - Your contributions can be
used to pay qualified elementary school and secondary school expenses
as well as those for higher education.
- Traditional IRAs Expand - Eligibility for
fully deductible IRAs have been expanding. Beginning in 2002 the
annual contribution limit has been increased from $2000 to $3000, in
2005 to $4000, and in 2008 to $5000. After 2008, the
contribution limit will be adjusted annually for inflation in $500
increments.
There are many more changes you should know about -
changes that let you maximize your savings...minimize your taxes... make
the most of your retirement investment.
Contact us today to
learn how new IRA options can work for you!
Your IRA Options at a glance
|
Answers to
your Questions |
| What is the maximum contribution? |
| Traditional
IRA |
Roth IRA |
Coverdell ESA |
| $3,000
or 200% of earned income whichever is less. |
$3,000 |
$2,000.00
per year per child until age 19. |
Are
contributions tax deductible?
Yes, if you are not an active participant
in a retirement plan.
Otherwise phaseout rules apply. |
|
CONTRIBUTION
PHASEOUTS
|
| Year |
Singles |
Married
Couples |
| 2003 |
$40,000 - $50,000 |
$60,000 - $70,000 |
| 2004 |
$45,000 - $55,000 |
$65,000 - $75,000 |
| 2005 |
$50,000 - $60,000 |
$70,000 - $80,000 |
| 2006 |
same as 2005 |
$75,000 - $85,000 |
| 2007 |
same as 2005 |
$80,000 - $100,000 |
| Dividend
earnings taxed? |
| Yes,
upon withdrawal |
No,
earnings grow tax-free |
No,
earnings grow tax-free |
| Contribution
restrictions? |
| Yes, if active participant in employer
retirement plan, phaseout between $33,000 - $43,000 for singles and
$53,000 - 63,000 for married couples. No limits for
individuals not actively participating in employer retirement plan. |
Yes, contributions phaseout between
$95,000 - $110,000 for singles and $150,000 - $160,000 for married
couples. |
Yes,
AGI of contributor must be less than $95,000 for singles, less than
$150,000 for married couples. |
| Catch-up contributions |
| Individuals who have reached age 50 by
the end of the year will be able to make additional catch-up
contributions of $500 per year. |
Individuals
who have reached age 50 by the end of the year will be able to make
additional catch-up contributions of $500 per year. |
Not Applicable |
| Penalties
for early withdrawal? |
None
if:
- Over age 59 1/2
- Death or disability
- Qualified medical expenses
- Certain health insurance
- Qualified college expenses
- 1st time home purchase
(up to $10,000)
- Due to IRS levy
|
None
if:
- Over age 59 1/2
- Death or disability
- Qualified medical expenses
- Certain health insurance
- Qualified college expenses
- 1st time home purchase
(up to $10,000)
- Due to IRS levy
(Money must be in account 5 years minimum in all
cases.) |
Not
Applicable |
| Any
restrictions for those with employer retirement plans? |
| No |
No |
No |
| Contributions
permitted after age 70 1/2? |
| No |
Yes,
contributions phaseout |
Yes
(but the funds must be withdrawn or rolled over by the time the
beneficiary reaches age 30 or be transferred to another
beneficiary.) |
Note: While every effort has been made to ensure the
accuracy of all material contained in this table, some areas are
subject to change based on regulatory interpretation or additional
congressional action.
|
