Beginning in 1998, you have new choices in IRAs. The new Roth IRA offers new and exciting opportunities to save. In addition, the traditional IRA has been changed and expanded. For the first time, you will have to decide which IRA is the best choice for your investment needs. You will want answers to some questions before making these decisions.

How Much May I Contribute Annually?

The contribution limit is the same for traditional IRA and Roth IRA. Generally, you may contribute $2,000 or 100% of earned income, whichever is less, to the Traditional IRA or Roth IRA. You may contribute to both, but not more than $2,000 total per year to the combination of the two.

Does My Level of Income Affect My Contribution Limits?

Yes. You may contribute to a traditional IRA, no matter how high your income is. The Roth IRA contribution limits are reduced, and then eliminated at certain high income levels.

Are My Contributions Deductible?

Contributions to a traditional IRA may be deductible, depending on (1) whether you are an active participant in an employer-maintained retirement plan, (2) your federal income tax filing status, and (3) your modified adjusted gross income (MAGI). Contributions to a Roth IRA are not deductible.

Characteristic	Roth IRA
Annual contribution limit	$2,000 (100% of earned income, if less)*
Age restrictions for contributions	None. Contributions may be made at any age.
Contribution MAGI phase-out ranges for 1998 contributions	$95,000 - $110,000 for single. $150,000 - $160,000 for married filing jointly.
MAGI for full deductibility for 1998	Not applicable. Contributions are never deductible.
MAGI limits for rollover eligibility	Rollover from traditional IRA to Roth IRA not allowed if MAGI over $100,000. Rollover from Roth IRA is not limited by income.
Age distribution requirements	None. Distributions not required during life of owner.
Taxation of distributions	Tax-free after five years participation in Roth IRA if distributed after age 59 1/2, after owner's death, while owner is disabled, or if used for a first-time home purchase ($10,000 lifetime maximum). Otherwise, earnings are taxable when distributed. Contributions, which are not taxable when distributed, are distributed first.
IRS 10% early distribution penalty	Applied to certain distributions prior to age 59 1/2 unless exception applies.

In the above chart, MAGI refers to modified adjusted gross income, RBD refers to required beginning date, and RMD refers to required minimum distribution.

* Contributions to a traditional IRA and a Roth IRA must be aggregated when applying the annual contribution limit. This contribution may be based on the combined income of the individual and the individual's spouse if the individual is married, filing joint federal income tax return, and the individual's spouse earned a greater amount than the individual.

Does it Matter How Old I Am?

To contribute to a traditional IRA you must be under age 70 1/2. You may contribute to a Roth IRA regardless of your age.

May I Rollover My IRA?

You may rollover your traditional IRA, regardless of your income level. You may also rollover your Roth IRA to another Roth IRA, regardless of your income level. However, you may not rollover or convert assets from a traditional IRA to a Roth IRA if your MAGI is above $100,000, no matter what your tax-filing status is.

Am I Required to Take Distributions from My IRA?

You must take distributions from your traditional IRA beginning by April 1 of the year after the year in which you attain age 70 1/2. You are not required to take any distributions from your Roth IRA at any age.

Are the Distributions from My IRA Taxable?

Distributions from your traditional IRA are fully taxable, except for the return of any nondeductible contributions. After five years, all distributions from your Roth IRA are tax-free, including earnings, if you are over 59 1/2, disabled, or a first-time home buyer. Otherwise, only the earnings are taxable, never the contributions. Contributions are always distributed before earnings.

Are the Distributions from My IRA Subject to the IRS Early Distribution Penalty?

The IRS 10% early distribution penalty is applied to certain distributions from either a traditional or a Roth IRA made before age 59 1/2, unless an exception applies.