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1. Traditional
IRAs (Individuals)
Traditional IRAs are primarily tax-deferred retirement
plans. Traditional IRA holders are taxed on deductible IRA contributions,
plus all earnings, when distributions are taken.
2. Roth IRA (Individuals)
The Roth IRA, first established for
the 1998 tax year, allows annual contributions of up
to $4,000. Account Holders who are age 50 or older may
contribute an additional $1000. Individuals may contribute
only if their modified AGI does not exceed levels established
by the government.
The distinguishing feature of a Roth IRA is that the earnings accrue
tax deferred and are potentially tax-free at the time of distribution.
Contributions to a Roth IRA are not deducible.
The Roth IRA is more accessible than the Traditional IRA in that individuals
may take a distribution of their principal amount at any time and
for any reason without penalty.
3. Coverdell Education (Individuals)
The Coverdell Education Savings Account,
formerly the Education IRA, provides for individuals to save for a
child's higher education on a tax-favored basis. The Coverdell Account
is a back-ended savings account similar to the Roth IRA in that no
deduction is allowed for the contribution.
The main tax benefits of the Coverdell Education Savings Account are
the tax-deferred growth of the earnings and the ability to take tax-free
withdrawals for higher education expenses.
Qualified education expenses now include Elementary, Secondary and
Post Secondary, Public, Private and Religious Schools. Also included:
tuition, fees, academic tutors, special needs services, books, supplies,
room and board, uniforms, transportation, computer equipment, educational
software, and internet access
4. Simple IRA (Individuals)
The SIMPLE IRA is a Savings Incentive Match PLan
for Employees. The SIMPLE IRA allows employee deferrals (up
to a maximum of $9,000 for 2004) and employer matching contributions
(up to a maximum of 3% of compensation) but does not require non-discrimination
testing or extensive reporting.
Once assets are in the SIMPLE IRA, Traditional IRA rules apply with
one major exception-the 10% premature distribution penalty is increased
to 25% for the first two years of participation.
5. Qualified Plans (Businesses)
A qualified plan is an employer-sponsored
employee benefit arrangement established for the purpose of providing
retirement income for eligible employees. The term "qualified plan" means
that the written document and the operation of the plan meet specific
qualification requirements outlined in the Internal Revenue Code (IRC)
Sec. 401 (a). When a plan meets these requirements the business establishing
the plan and the employees benefiting from the plan are entitled to
special tax consideration.
First WallStreet Financial Advisor offers the following
defined contribution retirement plans:
- Standardized Profit Sharing Plan
- Standardized Money Purchase Pension Plan
- Combined Profit Sharing and Money Purchase Pension
Plan
- Individual(k)
Uniform
Lifetime Table
IRS regulations require that you
take minimum distributions from your IRA and/or other qualified retirement
plans when you reach age 70 1/2. Your required minimum distribution
(RMD) is calculated by dividing your previous year-end balance by your
life expectancy factor. Use the Uniform
Life Chart to determine your required minimum distribution if you
are the original account holder of an IRA (not a beneficiary) and your
sole primary beneficiary is not a spouse more than 10 years younger
than you. If either of these two exceptions apply, please contact your
Investment Executive for assistance in calculating your required minimum
distribution
First WallStreet
Financial Advisors does not provide tax or legal advice.
Please consult with your own tax and legal advisors before
taking any action that would have tax consequences.
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