Retirement Accounts

It is easy to start saving for your retirement by opening an Individual Retirement Account at any bank or brokerage firm. There are a few different types of IRA's to consider:

Traditional IRA

The Individual Retirement Account (IRA) was first introduced in 1981 to provide Americans with a tax-favored means of saving for retirement. You should know the following about an IRA:

Contributions (2006)

• $4,000 a year individually. Taxpayers age 50 or older may contribute up to $5,000.
• You can have more than one IRA account, but your total annual contributions cannot exceed $4,000.
• You can deduct your contribution from your tax return as long as:
  • You earn less than $60,000 ($85,000 for joint filers).
  • You don't already contribute to your company 401(k) plan.
• You cannot make contributions past age 70½.

Investments

• You can choose from a wide range of IRA investments, including mutual funds or stocks.
• Your investments grow tax-deferred.

Withdrawals

• Withdrawals made before age 59½ will be subject to a 10% federal tax penalty.
• You can avoid the 10% penalty if early withdrawals are made for:
  • College expenses
  • Buying a first home
  • Medical expenses
  • Medical insurance if you're unemployed
• You must begin taking mandatory withdrawals at age 70½.
• You cannot borrow from your IRA or use it as collateral for a loan.
• You may, however, move the money to another qualified account during the 60-day period designed to allow you to roll your money into another account.
• You can withdraw the money from your IRA account and then have 60 days to redeposit the money in the account or in a new IRA account. If the money doesn't find its way back into an IRA account within the 60-day period, it will be subject to taxes and penalties.

Page 5 of 8: Putting Your Money to Work

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