Answer

I recently found an article entitled, "Roth IRAs: A Place to Save for Retirement," which appeared in your Visions newsletter. Could you please tell me the difference between a Traditional IRA and a Roth IRA? Are there any fees and what is the lowest and highest that you can contribute for the year 2002 (until April of 2003) and for the year 2003?

You can fund an IRA for 2002 up until April 15, 2003. A Traditional IRA may or may not be deductible, depending on your access to a qualified employer retirement plan and household adjusted gross income (AGI). If you are NOT an active participant in an employer plan, you can contribute up to $3,000 a year in 2002 and 2003, regardless of income, to a tax-deductible IRA. If you ARE an active participant, the phaseout range for single tax filers to receive a tax deduction for a Traditional IRA is $34k to $44k in 2002 and $40k to $50k in 2003. Incomes above the top of the range do not qualify for a deduction. Those in between the range limits receive a partial deduction. All monies withdrawn from a deductible IRA are taxable upon withdrawal at retirement. Another option is a Roth IRA. There is no up front tax deduction but withdrawals are tax free at age 59 1/2 if the account has been open at least 5 years. The younger a worker, the more attractive Roth IRAs are due to the tax-free buildup of earnings due to compound interest. There is an income limit of $110,000 of AGI above which Roth IRA contributions can't be made. To do some personalized IRA analyses for yourself, check the calculators on the Web site www.rothira.com.