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Individual Retirement Account (IRA)

The Individual Retirement Account offers an opportunity for qualifying individuals to save and invest for retirement. Investments may be made in stocks, bonds, certificates of deposit, bonds or mutual funds.

Because the IRA offers thousands of stocks, bonds mutual funds etc. to select from, it is imperative that you have some discipline for selecting these asset classes in appropriate dollar allocations to meet your retirement objectives.

NetInvestmentAdvisor.com provides a Risk Profile Questionnaire and Retirement Planner to develop an investment objective, based on your personal needs for retirement and tolerance for risk. After these two steps have been completed the Portfolio Builder will assist you in selecting and allocating the appropriate asset classes in dollars and or percentages to meet your risk adjusted objective. We urge you to review the Introduction to Asset Allocation as an initial step.

You may now go directly to the introductory tour of the site or review in more detail below the advantages of the Traditional and Roth IRA.

There are two types of Accounts available to individuals:

• The traditional Individual Retirement Account - IRA
• The Roth IRA

IRAs go back to the early 1980s when federal legislation created the tax deductible IRA for anyone with earned income. Significant changes have been made through the years that established income limits for participants in an employer sponsored retirement plan and closed the deductible IRA for many people. Contribution limits increased in 2002 and provisions are in place for further increases in the future.

The Roth IRA became available January 1, 1998. While not deductible it offers federal income tax-free growth.

Only earned income/compensation, such as salary and wages as defined in IRS Publication 590 may be invested in either the Traditional or the Roth IRA.

Traditional IRA- Deductable

People are eligible who have earned income and not in an employer- sponsored retirement plan regardless of income level. Or, people with such plans can take a full deduction if:

• They file jointly and their Adjusted Gross Income (AGI) in 2002 was under $54,000 increasing to $80,000 in 2005.
• Single filers whose AGI was under $34,000 in 2002 increasing to $50,000 increasing to $50,000 in 2005.

People with an employer-sponsored retirement plan may have a PARTIAL deduction if:

• Income was between $54,000 and $64,000 in 2002 increasing to $100,000 in 2005.
• Single filers whose AGI was between $34,000 and $44,000 in 2002 increasing to $60,000 in 2005.

There is an age limit because of mandatory withdrawals at age 70 ½. Distributions must begin by April 1 of the year after reaching age 70 ½. Contributions and earnings are not taxed until withdrawals and then they are taxed at ordinary income tax rates. Distributions before age 59 ½ are generally subject to a 10% penalty.

Exceptions are withdrawals for:

• Education
• Medical costs above 7.5% of AGI
• Qualifying health insurance
• Up to $10,000 for FIRST TIME home purchase
• Disability or death.

ROTH IRA

A person is eligible at any age with earned income if they are:

• Joint filers whose current Adjusted Gross Income (AGI) is less than $150,000. There is a phase-out scale between $150,000 -$160,000.They can not participate if AGI is more than $160,000.
• Single filers whose AGI is less than $95,000. There is a phase-out scale between $95,000-$100,000. No participation if AGI is more than $110,000.

Contributions to a Roth IRA are NOT tax deductible.

Earnings and growth are free from FEDERAL income tax after a minimum of five years. Some States may tax this income, so check your State tax laws. Penalties may apply for withdrawals taken within the five year minimum. After five years it is assumed that contributions are withdrawn first

Distributions from interest/growth before age 591/2 are generally subject to 10% penalty. Exceptions are withdrawals:

• For education.
• Up to $10,000 for FIRST time home buying.
• Death or disability.

ROTH in neither an acronym nor a financial term, it is named after the sponsor of the original legislation, Sen. William V. Roth Jr. (R-Del)

Your financial goals, current financial situation, investment experiences and attitudes all contribute to your investment profile. We have created the following FREE Risk Profile Questionnaire to help you determine your attitude toward risk. We'll ask you 9 multiple choice questions designed to gauge your ability to tolerate investment risks and your financial capability to take such risks. Then we'll give you your score and tell you how much risk you can afford, and how much you can tolerate.

After completing the Questionnaire we urge you to complete the Retirement Planner to fine tune your investment strategy.

401k • 403b • Taxable Savings • Individual Retirement Account (IRA)
Variable Life Insurance / Variable Annuities • Thrift Savings Plan

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