Contributions

• Earned Income
• Prior to the age of 70½ years
• Up to $4,000 or the total earned income for 2006 - 2007, whichever is less.
  Up to $5,000 or the total earned income for 2008, whichever is less.
• Modified Adjusted Gross Income cannot exceed certain limits.
• Higher limit if age 50 or older.
   

Exception: Spousal Contributions. A compensated spouse can make a contribution to an IRA for a non compensated spouse. The total that can be contributed to his own and the spousal IRA is limited to the total of the compensated spouse's earned income or $4,000 whichever is less.

• Contributions for each year can be made until the tax filing deadline in the following year (not including extensions).

Transfers

• Direct Transfer - This transaction is done entirely between the financial institutions, the member has no contact with the funds. These can be done any number of times in the year.
• Rollovers - In this transaction, the member has use of the funds for up to 60 days. If the funds are deposited into an IRA within the 60 day period, there are no tax consequences. If not, the amount withdrawn will be taxable. This type of transaction can be done just once in a 12 month period.

Withdrawals

• Must be reported on the members tax return.
• Premature Distribution - A withdrawal done before the member reaches age 59½. These funds are taxable and the member must pay a 10% penalty tax for early withdrawal.

Exceptions: The penalty will not be imposed for the withdrawal due to death or disability; or if the member elects to take equal periodic payments over a 5 year period or until he reaches 59½, whichever is longer. This means that if the member is 56 years old, he will have to take periodic payments until he is 61. But if he is 46 years old, he will have to take the payments until he is 59½.

• Normal Distributions - After 59½ years old, a member can take funds from the IRA with no penalty from the IRS. However the amount withdrawn is considered taxable income.
• Required Distributions - When the member reaches 70½, they must begin taking a minimum amount out of the IRA each year. The first distribution must be made by April 1 following the year in which the member turns 70½.

New Exceptions: Members who are younger than age 59½ can avoid the 10% penalty when withdrawing for one of the following reasons.

• Qualified first-time home buyer distributions.
• Higher education expense distributions.
• Distributions to pay for medical expenses that exceed 7.5% of adjusted gross income.
• Distributions to pay for medical insurance premiums when unemployed.

   

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3306 North Clinton St. Fort Wayne, IN 46805 - 260-484-2102