Individual Retirement Account Changes Offer
Enhanced Savings Opportunities

• While contributions to Roth IRAs are not tax deductible, earnings are tax-deferred and qualifying withdrawals are tax-free.
• You pay no taxes or penalties on your withdrawals from a Roth IRA that has been opened for at least five years, as long as you are over age 59-1/2, experience a disability, or use the money (up to $10,000) for a first home purchase, which could include helping certain family members purchase a home. The death of a Roth IRA holder results in a distribution to the account beneficiary which is generally tax-free (check with your tax advisor for specifics regarding your situation.)
• Individuals may contribute up to $3,000 per year as long as their adjusted gross income is less than $95,000. Those with incomes between $95,000-$110,000 may contribute a reduced amount.
• Married couples filing jointly may contribute up to $2,000 EACH if their adjusted gross income is less than $150,000. Those with incomes between $150,000-$160,000 may contribute a reduced amount.
• Contributions to a Roth IRA may continue after age 70-1/2 as long as you have an earned income at least equal to your contributions.
• No minimum distribution is required when you reach age 70-1/2.

Generally speaking, you may convert your traditional IRA to a Roth IRA beginning Jan. 1, 1998 unless you exceed adjusted gross income requirements or are married and file a separate tax return. It is important to note that you will have to pay taxes (but no 10% early distribution penalty) on all pre-tax dollars distributed from the traditional IRA to a Roth IRA. It may be possible to spread this tax burden over four years if the conversion takes place in 1998.

Changes to traditional IRAs

The Taxpayer Relief Act also contains some important changes to regulations regarding traditional IRAs.

The new law allows a spouse without a personal pension to have a fully deductible traditional IRA as long as the couple’s adjusted gross income is $150,000 or less.

Income levels for deductibility will increase starting in 1998. For example, income levels (for both full and partial deductions) for couples will increase by $10,000 in 1998 and by $5,000 for individuals. Income requirements for deductibility will continue to increase for the next several years.

In addition to allowing penalty-free distributions for those reaching age 59-1/2, for those experiencing a disability, or in the event of death, the new law allows two new penalty-free distributions: to pay for higher education expenses or for a first-time home purchase.

IRAs are a smart part of every saver’s retirement plans

IRAs are a smart addition to any retirement plan and starting early means you’ll be well on your way to a comfortable retirement. Traditional IRAs from FAIRWINDS Credit Union offer:

• Flexibility. You can match IRA decisions with economic trends. You can invest your money for as little as 30 days or as long as five years.
• Option of regular monthly deposits to fixed-rate IRA Certificates. Deposits can be made at your convenience, in increments of $10 up to the maximum allowed by law. Payroll deduction is a convenient option that lets you accumulate funds throughout the year at a pace with which you’re comfortable.
• Tax Advantages. Standard IRA contributions may be fully or partly deductible (consult your tax advisor). And the dividends you earn are always tax-deferred. The new Roth IRA does not allow contributions to be deducted, but withdrawals meeting certain criteria are tax-free.

If you’ve been weighing the benefits of insured investments with a fixed rate of return against uninsured alternative investments which fluctuate in value and have potentially higher returns, it may be time to talk with our financial counselors. Located at Fairwinds Financial Services, Inc., a wholly owned subsidiary of FAIRWINDS Credit Union, they can explain your many options in plain English.

For More Information

To find out more about the new ROTH Individual Retirement Account as an uninsured investment, please call one of our financial counselors at (407) 282-6039. They can help you compare your new IRA options, enabling you to make the choices that best suit your needs.

Uninsured investment options are also available through Fairwinds Financial Services, Inc.:

• Financial Planning Services
• Estate Planning Services
• Mutual Funds
• IRAs (including the new ROTH IRA)
• Tax Deferred Annuities
• Life, Health & Disability Insurance
• Long Term Care & Medicare Supplement Insurance
• Brokerage Service For Buying And Selling Stocks, Bonds & Other Publicly Traded Securities.