IRAs Aren't Just For Retirement Anymore
Which IRA is Right for You?

Now IRAs let you save for a first home or higher education as well as for retirement. And you can realize tax advantages at the same time! Whether it's the Traditional IRA, Roth IRA or Rollover IRA, there's probably one that's right for you.

Traditional IRAs
Anyone under the age of 70 1/2 for the entire tax year and who has earned income may make a contribution up to $4,000 for 2006 and for 2007 (or 100% of earned income, whichever is less) to a traditional IRA.

Eligible individuals age 50 and older who qualify to make regular contributions to IRAs may make additional contributions to their Traditional (and Roth) IRAs in the form of catch-up contributions. Beginning in 2006 the maximum catch-up contribution limit for Traditional and Roth IRAs became $1,000. The maximum catch-up contribution applies per individual, per year, not per IRA.

Earnings on your Traditional IRA are tax deferred until they are withdrawn. In addition, many people can also save on their present taxes by qualifying to deduct all or part of their IRA contributions from their current taxable income. The deductible amount depends on your income, marital status and whether you're an active participant in an employer sponsored plan as defined by the Internal Revenue.

With a Traditional IRA you also defer taxes by putting them off until you retire, when you may be in a lower tax bracket. The chart below shows you how much you may be able to save each year. Please consult your tax advisor to review your particular situation on the tax-deductible status of an IRA.

Is an IRA Right For You? See our Retirement Savings and Planning Calculators and find out. Then call one of our customer service representatives today at 508-653-2340.

IRA Tax Savings Potential Chart

IRA Deductible Contribution Amount	15 % Tax Bracket Savings	28 % Tax Bracket Savings	31 % Tax Bracket Savings	36 % Tax Bracket Savings	39.6 % Tax Bracket Savings
$ 500	$ 75	$ 140	$ 155	$ 180	$ 198
$ 1,000	$ 150	$ 280	$ 310	$ 360	$ 396
$ 2,000	$ 300	$ 560	$ 620	$ 720	$ 792
$ 2,250	$ 337	$ 630	$ 697	$ 810	$ 891
$ 4,000	$ 600	$ 1,120	$ 1,240	$ 1,440	$ 1,584

Traditional IRAs require that you begin to take at least minimum distributions prior to April 1st of the year following the year you reach 70 1/2. You are permitted to withdraw funds without penalty any time after you reach age 59 1/2 or if you qualify for an exemption such as for a first-time home purchase, for qualified higher education, or if you become disabled. If you are over age 59 1/2 or taking a qualifying distribution, you simply include the taxable portion of the amount withdrawn (generally, deductible contributions and all earnings) as income. However, if you are under age 59 1/2 and do not meet one of the exceptions, you must also pay a 10 percent IRS penalty for premature distribution. The non-deductible portion of the distribution is not taxable when withdrawn, but is subject to the 10 percent premature-distribution penalty.

Roth IRAs
The Roth IRA is a nondeductible account that features tax-free withdrawals for certain distribution reasons after a five-year holding period. Since Roth IRA contributions are nondeductible and taxed in the year they are earned, people who expect to be in a higher tax bracket when they retire may benefit more from these accounts than from a Traditional IRA. In addition, unlike with the traditional IRA, the Roth IRA has no age 70 1/2 required minimum distribution, making it easier to leave the funds to accumulate for later use.

There are two basic requirements for eligibility to contribute to a Roth IRA: you must have earned income (or your spouse must have earned income) and your Modified Adjusted Gross Income (MAGI) cannot exceed the following limits:

-	Full $4,000 Contribution*	Partial Contribution	No Contribution
Single Filers	MAGI of $95,000 or less	MAGI between $95,000 and $110,000	MAGI of $110,000 or more
Married Filers	MAGI of $150,000 or less	MAGI between $150,000 and $160,000	MAGI of $160,000 or more

* If the individual is eligible for a catch-up contribution, the Full Contribution amount is $5,000.

NOTE: $4,000 is the aggregate amount that you can contribute to any Roth and/or Traditional IRA in a given year. For example, if you contribute $500 to a Traditional IRA, the most you could contribute to a Roth IRA is $3,500 for that year.

Unlike the Traditional IRA, earnings in a Roth IRA are not taxable provided you withdraw the earnings as part of a qualified distribution. After the five-year holding period, qualified tax-free distributions can be made if you have reached age 59 1/2, or are permanently disabled, for a first-time home purchase, or in the event of your death.

As with Traditional IRAs, there is a 10 percent IRS premature distribution penalty for non-qualifying withdrawals. The distributions for which this IRS penalty is waived, but which are subject to taxes on earnings, include:

• Substantially equal periodic payments,
  
• Medical expenses in excess of 7.5 percent or your adjusted gross income (AGI),
  
• Healthcare insurance if you've been receiving unemployment compensation for at least 12 weeks,
  
• Qualified higher education expenses, and
  
• Distributions within the first five years, taken for the purpose of a first-time home purchase, death or disability, or upon reaching age 59 1/2.

While qualified distributions from a Roth IRA are not subject to federal income taxes, state taxes may apply. In addition, distributions from the Roth IRA are considered to come from contributions first (as opposed to earnings) and are not subject to taxation or the 10 percent IRS premature-distribution penalty. In other words, you can always get back your principal tax-free and IRS penalty-free for any reason. Please note, however, that there may be Certificate of Deposit early withdrawal penalties depending upon the investment account you have chosen for your Roth IRA Plan.

If You're Changing Employers, An IRA Rollover Makes Sense. If you are retiring or changing jobs and anticipate withdrawing money from your employer's retirement plan, you can avoid withdrawal penalties by transferring your assets into an IRA or another qualified plan. You can ask your employer to arrange for a "direct rollover" of your money into a new IRA account with us, or you can do it yourself with an IRA-to-IRA rollover.

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