Co-op Credit Union -- IRA


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IRA ACCOUNTS

The Taxpayer Relief Act of 1997 created a variety of new IRA options. Not only did it change rules for the traditional IRA, but it also introduced the Roth and Education IRAs. These options were improved by the Economic Growth and Tax Relief Reconciliation Act of 2001.

Traditional IRAs are more attractive than ever because expanded income limits mean more people will be able to make tax-deductible contributions. In addition, penalty-free withdrawals are allowed for qualified higher-education expenses and for a first-time home purchase.

Contributions to the Roth IRA or Coverdell ESA aren't tax-deductible, but the accounts offer the opportunity for tax-free earnings.

Your tax adviser can offer more guidance on which type of IRA may be best for your needs. Of course, we are always here to answer your questions and assist you with opening an IRA. Please stop by or call us today for more information on the benefits of a credit union IRA.

Comparing your IRA options A quick reference on the key differences among traditional, Roth and Coverdell Education Savings Accounts
	Who can contribute?	How much can I contribute?	What are the tax advantages?
Roth IRA	• Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI*: ---Up to $95,000 (single filers) ---Up to $150,000 (joint filers) • Reduced contributions allowed for higher incomes (up to $110,000 for single filers and $160,000 for joint filers)	• $3,000 for 2002 through 2004 • Higher limit if age 50 or older • Cannot exceed compensation • Reduces contributions that can be made to traditional IRAs	• Regular contributions can be withdrawn tax- and penalty-free at any time. • After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons: age 59-1/2, disability, death, or a first-time home purchase**
Traditional IRA	• Anyone under age 70-1/2 who has income from compensation (or who is filing jointly with a spouse who earns compensation)	• $3,000 for 2002 through 2004 • Higher limit if age 50 or older • Cannot exceed compensation • Reduces contributions that can be made to Roth IRAs	• Earnings grow tax-deferred until withdrawn • Contributions may be tax-deductible
Coverdell Education Savings Account***	• Anyone who has MAGI* ---Single filer: up to $95,000 ---Joint income for filers: up to $190,000 • People with higher MAGI may be able to make smaller contributions • Contributions not allowed after the beneficiary reaches age 18 (except for special-needs beneficiaries	• $2,000 per child • Limit applies to all Coverdell ESAs for the same child	• Withdrawals for certain qualified education expenses are tax-free • Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age • Qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education • A beneficiary may receive tax-free distributions from a Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits
* MAGI --- modified adjusted gross income from the federal tax form Lifetime limit for exemption on first-time home purchase is $10,000 * Formerly known as the Education IRA

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