• The individual is not an active participant under an employer's retirement plan

Or if:

• During 2002, the individual earned no more than $54,000 if married and filed jointly, or $34,000 if filing singly. These amounts continue to increase through 2007 and 2005 respectively.

For those who participate in an employer plan, Traditional IRA deductibility is gradually phased out above these income levels.

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TRADITIONAL IRA: For individuals under age 70 1⁄2 who have earned income.

ROTH IRA: For individuals of any age with earned income and adjusted gross income below $110,000 (single) or $160,000 (joint). However, the amount you are allowed to contribute each year does decline once you reach adjusted gross income over $95,000 (single) and $150,000 (joint).

TRADITIONAL IRA: A tax-deferred investment with a possible tax deduction if you do not have an employer-sponsored retirement plan or if your income is below certain levels.

ROTH IRA: A tax advantage includes tax-free investment growth if the account has been open for five years or more and meets the qualified distribution rule. There are no tax deductions for contributions, but tax-free growth on compounded interest replaces this benefit.

TRADITIONAL IRA: Income tax is due on all withdrawals, and withdrawals made prior to age 59 1⁄2 may be subject to an additional 10 percent IRS penalty.

ROTH IRA: The investor's contributions to the account may be withdrawn at any time. But to qualify for tax-free withdrawal of investment earnings, the account must be open for at least five years and the account owner must be at least 59 1⁄2 or purchasing a first home. (Under the new laws, even if you've previously owned a home, you may still qualify as a first-time home buyer).

TRADITIONAL IRA: Distributions must start by age 70 1⁄2.

ROTH IRA: There is NO requirement to begin withdrawals at age 70 1⁄2.

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Additional Considerations for Roth and Traditional IRAs
There is no minimum or maximum age requirement for a Roth IRA. Young investors can withdraw their contributions at any time without tax or IRS penalty in case of an emergency. Thus, young investors will be more likely to save. Older investors may make tax-free withdrawals.

Tax-deferred earnings of a Traditional IRA mean faster investment growth for the short term. While tax-free distributions of a Roth IRA mean keeping everything you earn - with the potential for greater earnings long term. Each individual situation is unique and you should consult your financial advisor before deciding if the Roth IRA is right for you.

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Is there a Roth IRA Early Withdrawal Penalty?
Not on your contributions, but any earnings withdrawn before the account has been open for at least five years, and/or are not used for one of the qualified distributions, is subject to tax and a 10% IRS penalty.
Qualified distributions are:

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Compare for Yourself: IRA Calculator
Use our Traditional IRA Calculator to determine how contributing to a traditional IRA can help your retirement.

To compare a Roth IRA to an ordinary taxable investment, use our Roth IRA Calculator.

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What if I'm covered by a retirement plan at work?
Coverage you may have with other retirement plans does not affect your eligibility to make a Roth IRA contribution.

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What if I have a SIMPLE or SEP IRA?
You are still eligible to make a Roth IRA contribution.

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Can I move all or part of my Traditional IRA to a Roth IRA?
Yes, but you must have an adjusted gross income of less than $100,000. You are taxed on the rollover amount of the taxable portion of the Traditional IRA. The funds are not subject to the 10% IRS penalty tax.

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How do I know if a Roth IRA is right for me?
We recommend you consult with your accountant or financial advisor to determine if a Roth IRA is right for you.

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How do I invest my IRA dollars?
There are no special requirements for Roth IRA investments. Your choices range from federally insured Certificates of Deposit to more aggressive non-insured investment products.

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Is there a benefit to starting my Roth IRA now?
Yes, the sooner your funds start working for you, the more your Roth IRA will be worth at retirement. Also, the five-year rule for qualified distributions begins when the first Roth IRA is opened.

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Can I move my Roth IRA from another financial institution to this bank?
You may move your Roth IRA from somewhere else to this bank. The five years begin when you open your first account. So, if you open it at another institution in 2002 and move it to our bank in the year 2004, we count the date the original account was opened (2002). Thus, you would be eligible for a qualified distribution in the year 2007.

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What does the Economic Growth and Tax Relief Reconciliation Act of 2001 mean to me?
This recent act allows you more incentives for IRA investing. This includes greater contribution limits for both the Traditional and Roth IRAs, more flexibility in moving money between IRAs and the expansion of the Coverdell Education Savings Account (formerly the Education IRA). The standard contribution limit for both Traditional and Roth IRAs has been raised to $3,000, with continuing contribution increase in future years. And if you’re over 50, you can now make an additional “catch-up” contribution of $500 from 2003 to 2005.

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One of our Customer Service Representatives will be able to assist you with most IRA questions. Contact us.

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