Traditional IRA Description FAQ
Roth IRA Description FAQ
Coverdell Education Savings Account FAQ  

Traditional IRA
IRA's can be deductible and/or non-dedcuctable and have been available since the early 1970's. For purposes of this page, we will refer to these IRA's as a Traditional IRA.

Who is eligible to contribute?
Individuals and couples with earned income are eligible to contribute to an IRA on a tax-deductible basis if they aer not participating in a qualified retirement plan. Participants in a qualified retirement plan can still contribute, but on a tax-deductible basis.

How much can I contribute?
The IRA allows an individual to make a contribution of 100% of earned income up to the annual IRS stated amount. Combination working/non-working spouse couples can each contribute up to the annual IRS stated amount annually to IRAs. All contributions must be made by the individual's tax filing deadline, normally April 15th. Extensions do not apply. 

Can I have more than one IRA?
Yes, provided your contributions to all types of IRAs do not exceed the annual IRS stated amount.

When can I make withdrawals from any IRA?
Although assets may be withdrawn at any time, only distributions, which meet the following requirements, are exempt from the 10% early distribution penalty, federal income tax, and more than likely, state income taxes.
The withdrawal must be due to:

Attainment of age 59 1/2
Death
Disability

If you need to withdraw funds prior to meeting the above requirements, any distribution of earnings will be subject to taxes and the early distribution penalty.

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Roth IRA
Created by the Taxpayer Relief Act of 1997, the Roth IRA is an attractive retirement savings account, which provides potential for tax-free growth & distributions.

Who is eligible to contribute?
Individuals and couples with Adjusted Gross Income (AGI) below the annual IRS stated amount are eligible to contribute to a Roth IRA, regardless of age.

How much can I contribute?
The Roth IRA allows an individual to make a non-deductible contribution of 100% of earned income up to the annual IRS stated amount annually.
Combination working/non-working spouse couples can each contribute up to the annual IRS stated amount annually to Roth IRAs. All contributions must be made by the individual's tax filing deadline, normally April 15th. Extensions do not apply.

Can I have more than one Roth IRA?
Yes, provided your contributions to all types of IRAs do not exceed the annual IRS stated amount.

When can I make withdrawals from any Roth IRA?
Although assets may be withdrawn at any time, only distributions, which meet the following requirements, are exempt from the 10% early distribution penalty, federal income tax, and more than likely, state income taxes.
The account must have been open for at least five years and...
The withdrawal must be due to:

attainment of age 59 1/2
death
disability
first home purchase for IRA owner, their spouse or their dependents

If you need to withdraw funds prior to meeting the above requirements, any distribution of earnings will be subject to taxes and the early distribution penalty. However, distributions are deemed to come first from principal, which is not subject to taxation or penalty.

Another attractive retirement planning feature of the Roth is that there are no required minimum distributions from a Roth IRA at age 70 1/2.

Can I fund a Roth IRA for my child or grandchild?
Yes, provided your child or grandchild (the IRA owner) has earned income. Any tax liability is the responsibility of the IRA owner.

I'm ready to open a Roth IRA, what's the next step?
First, consult your tax advisor to determine if a Roth IRA is suitable for you. Then, contact our Customer Service Representative for information on the necessary paperwork to establish a Roth IRA.

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Coverdell Education Savings Account

What is a Coverdell Education Savings Account?
A Coverdell Education Savings Account is type of tax preferred savings and investment account authorized by Internal Revenue Code Section 530 to encourage taxpayers to save for future education expenses. Coverdell Education Savings Account first became available as of January 1, 1993, for the 1993 calendar year, as result of the Taxpayer Relief Act of 1997. The annual contribution limit for contributions during the period of 1998-2001 was $500 per designated beneficiary. The annual contribution limit for contributions for tax year 2002 and subsequent years is $2,000 per designated beneficiary.

Who general establishes Coverdell Education Savings Account?
Grandparents and parents generally are the individuals who establish Coverdell Education Savings Accounts. However, there is no legal requirement that a person must be a relative of the person for whom they wish to contribute funds to a Coverdell Education Savings Account.
The new tax law authorizes entities other than individuals to make contribution
to a child's Coverdell Education Savings Account. For example, a nonprofit entity such as a church or foundation could make a contribution to a Coverdell Education Savings Account for a child.

What is the new purpose for Coverdell Education Savings Accounts?
The primary reason for creating and establishing Coverdell Education Savings Accounts has been greatly expanded. Prior to EGTRRA, the defined purpose of a Coverdell Education Savings Accounts was to accumulate funds to be used to pay for college, technical school, or postgraduate work. In 2002, the Coverdell Education Savings Account will be able to be used to pay for elementary and secondary education (kindergarten through grade 12) expenses incurred in public, private or religious schools, as well as for college, technical school, or postgraduate work.

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