Traditional IRAs

Will you be able to retire comfortably?

Thanks to the Taxpayer Relief Act of 1997, IRAs today are more flexible, and more people have access to their tax advantages. And, IRAs aren't just for
retirement, either. You can withdraw funds from your IRA without tax penalties for qualified educational expenses or to buy your first home.

A Traditional IRA offers great tax benefits. Your contributions today are
tax-deductible and taxes on earnings are deferred until withdrawal. With a
Traditional IRA, you get a competitive interest rate and you can convert it to
an annuity at retirement to provide a lifetime income.

Can you qualify for a Traditional IRA?

If you're under 70 1/2, you may be able to contribute up to $3,000 a year if
single, or $6,000 if married. If neither you nor your spouse participate in a
retirement plan, each of you can deduct the full $3000 IRA contribution for a total of $6,000 a year.

If one spouse participates in an employer plan, there are income limits restricting deductibility of IRAs. These adjusted gross income limits, which gradually phase out tax-deductible contributions, will increase from $40,000 to $80,000 for joint filers by the year 2007 (and from $25,000 to $50,000 by the year 2005 for a
single taxpayer). A non-working spouse can take the full $3,000 tax deduction if the other spouse participates in a retirement plan, but that is phased out
beginning at $150,000 joint adjusted gross income.

Flexible withdrawal options

Withdrawals from Traditional IRAs are taxable in the year they are taken.

- First home purchase (limited to $10,000)
- Qualified higher education expenses
- Death or disability
- Certain medical or health insurance expenses

The Choice
Making the choice between a Traditional and a Roth IRA is not a difficult one. The factor that you will most consider is the timing of the income tax benefit. With a Traditional IRA, the tax benefit is usually taken when the contribution is made to the IRA. For the Roth IRA, because you cannot take a tax deduction for the contributions made, qualified distributions are tax-free. If you are unable to take a
deduction for a contribution made to a Traditional IRA, it may make better sense to contribute to a Roth IRA instead. Your financial advisor may even decide that a combination of both is in your best interests. Should you decide later that you contributed to the wrong type of account, you can always change you mind and move the contributions to the other type of IRA. This is referred to as a
"re-characterization." Should you decide to re-characterize your IRA contribution, you must contact your IRA custodian to determine their documentation and
procedural requirements.

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