Individual Retirement Accounts

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Traditional IRA

Roth IRA

Coverdell ESA
(Formerly Education IRA)
Qualifications Must have earned income and not have reached age 70 1/2 by the end of the year. Must have earned income. There are no age restrictions. The designated beneficiary must be an individual under the age of 18. Beginning in 2002, the age 18 limitation will not apply to any designated beneficiary with special needs.
Maximum
Annual
Contributions
Taxable years beginning
In 2002 through 2004. . . . $3,000
In 2005 through 2007. . . . $4,000
In 2008 and after. . . . . . . $5,000*
Taxable years beginning
In 2002 through 2004. . . . $3,000
In 2005 through 2007. . . . $4,000
In 2008 and after. . . . . . . $5,000*
Taxable years beginning
In 2002 and after. . . . . . . . $2,000 per beneficiary
Contributions do not count against the limits for IRA's
Tax Status
of Earnings
Tax-deferred until withdrawal Not taxed. Earnings grow tax-free. Not taxed. Earnings grow tax-free.
Contribution
Restrictions
Yes, if active participant in employer retirement plan.
CONTRIBUTION PHASEOUTS
Yr  Singles  Married Couples
2002 $34,000-$44,000 $54,000-$64,000
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
Yes, contributions phaseout between $95,000-$110,000 for singles and $150,000-$160,000 for married couples. Yes, contributions phaseout between $95,000-$110,000 for singles and $150,000-$160,000 for married couples. For tax years beginning 2002, $190,000-$220,000 for married couples.
Tax
Deduction
Yes. Contributions up to the limit are fully tax deductible if you are not an active participant in a retirement plan. Otherwise phaseout rules apply. No. No.
Penalties for
Early
Withdrawal
None if:
Over 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 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:
For payment of qualified education expenses
Required
Distributions
Must begin by April following year participant turns 70 1/2. Only after death of the participant. Must be complete 30 days after beneficiary reaches age 30 or dies. Beginning in 2002, the age 30 limit will not apply to any beneficiary with special needs.
Contributions
After
Age 70 1/2
Not allowed. Allowed. Allowed.

*To be adjusted annually for inflation in $500 increments



Education Savings Account
Making-Up For Lost Time
An Individual Retirement Account (IRA) is an excellent tool for retirement savings. Unlike most
investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free.

A Coverdell Education Savings Account (ESA) (formerly Education IRA) is a great way for parents, grandparents and others to help meet the rising costs of a student's education.

Recent tax law changes have made IRAs
and ESAs even better.

Traditional IRA
The annual contribution limit increases to $3,000 in 2002, $4,000 in 2005 and $5,000 in 2008. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments. The annual limit applies to any combination of IRA plans other than the ESA. Contributions are fully tax deductible if you are not an active participant in an employer retirement plan. Investments grow on a tax-deferred basis. Earnings are taxed only upon withdrawal.

Roth IRA
As long as you have earned income, you can establish and contribute to a Roth IRA even after age 70 1/2. While contributions are not tax deductible, contributions and earnings can be withdrawn tax-free, and unlike traditional IRAs, you are not required to begin taking required minimum distributions after reaching age 70 1/2. By converting your traditional IRA to a Roth IRA, you can enjoy tax-free withdrawals. However, the amount you convert is subject to income tax now.

Making-Up For Lost Time
Catch-up contributions-For taxable years beginning in 2002, 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 to their traditional or Roth IRA. For taxable years beginning in 2006, the additional catch-up amount increases to $1,000.

Education Savings Account
For taxable years beginning in 2002, the
annual contribution amount has been
increased from $500 per beneficiary to
$2,000 per beneficiary.

While there is no tax deduction for amounts contributed to a Coverdell Education Savings Account, earnings grow tax-free. And your ESA can be used to pay qualified elementary school and secondary school expenses as well as those for higher education.

Contact your banker today to learn more about today's IRA!


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