BizNet OnLine Magazine, Mr. Money Know' s, LET’S START LOOKING AT IRAs

Mr. Money - Know' s
By: Dana Goldfarb
Financial Writer
dana@biznetonline.com

LET’S START LOOKING AT IRAs

Happy New Year. I hope you regularly contributed to your retirement plan last year. What?

You didn’t? O.K., you still have a couple of options. This month we’ll take a look at a Regular IRA (sometimes called a Traditional IRA). Here’s the quick and dirty.........

Who is eligible to participate? Anyone under age 70 1/2 with earned income, regardless of income level, and a non-working spouse under age 70 1/2.

How much may I contribute for myself and my non-working spouse? Up to $2,000 per year, per person, reduced by any amount contributed to a Roth IRA(more about the Roth, later).

Is my contribution deductible? If you do not participate in an employer-sponsored retirement plan, it is fully deductible. If you do participate in an employer-sponsored plan and have an adjusted gross income that falls between $30,000 and $40,000 (single) or $50,000 and $60,000 (joint) your $2,000 contribution is partially deductible . If you are participating in an employer-sponsored plan and your spouse is not participating in his or her own plan, a contribution may be deductible if your joint adjusted gross income is not over $150,000.

Can I transfer an IRA? Yes, you can transfer from one Regular IRA to another.

What’s a Rollover? If you retire, you can move, or roll over, your employer-sponsored retirement plan into an IRA. If it’s done properly, it will not be taxed. If you change jobs, you can roll over your employee-sponsored retirement plan into an IRA. But before you do that, check with your new employer; you may be able to transfer your plan at the old place into a plan at the new place, so you won’t need an IRA.

What about withdrawals? You can -but don’t have to- withdraw assets from your IRA after you reach age 59 1/2 without a penalty. You must start to withdraw assets from your IRA in the year you reach age 70 1/2. But, if you forget to take it in that year, the IRS will cut you some slack and will let you take it until April 1 of the year following your 70 1/2 year. But then you’ll have to take two distributions in that year, one for your 70 1/2 year and another for 71 1/2.

Income taxes must be paid on the portion of all withdrawals attributable to deductible contributions and earnings.

A 10% penalty tax on withdrawals taken before age 59 1/2 will be imposed unless you have a valid exception, and there are a bunch of them.

Now, this is just the quick and dirty; space limitations prevent me from giving you the slow and dirtier. Before you decide that this is the plan for you, I strongly urge you to contact your broker, CPA, or tax attorney for advice. You can also get the complete scoop at your new, "friendly" IRS office; ask for Publication 590 "Individual Retirement Arrangements." And if that isn’t a viable option, try the Web - www.irs.ustreas.gov. The whole publication can be downloaded.

Next month, we’ll take a look at the Roth IRA.

Dana Goldfarb is a broker for Sutro & Company In Woodland Hills Ca.
And Can Be Reached At (818) 313-8700

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