1. What is a Roth IRA?
The Roth IRA is a nondeductible account that features tax-free withdrawals for certain distribution reasons after a five-year holding period.

2. Am I Eligible for a Roth IRA?
Basically, there are two requirements for eligibility to contribute to a Roth IRA: you must have earned income (or your spouse must have earned income) and your modified adjusted gross income (MAGI) cannot exceed certain limits (see table below).

3. How Much Can I Contribute?
You may contribute any amount up to the lesser of 100 percent of your compensation or the maximum contribution amount (MCA), if your MAGI is within prescribed limits. These prescribed limits for contribution are:

MAGI of $95,000 or Less	MAGI Between $95,000 and $110,000	MAGI of $110,000 or More
Full Contribution	Partial Contribution	No Contribution

MAGI of $150,000 or Less	MAGI Between $150,000 and $160,000	MAGI of $160,000 or More
Full Contribution	Partial Contribution	No Contribution

MAGI Less than $15,000	MAGI of $10,000 or More
Partial Contribution	No Contribution

The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 defines the contribution limit as shown in the chart below:

Tax Year	Contribution Limit
2002 - 2004	$3,000
2005 - 2007	$4,000
2008	$5,000
2009 and thereafter	$5,000 + cost-of-living adjustment (COLA)

The MCA is the aggregate amount that you can contribute to any Roth and/or traditional IRA in a given year. For example, if you are younger than age 50 and you contribute $500 to a traditional IRA for 2002, you can only contribute $2,500 to a Roth IRA.

To make up for lost retirement savings, EGTRRA also added "catch-up" contribution ability for individuals who have attained age 50 or older by the end of their taxable year. The chart below shows these additional amounts which will increase the MCA for Roth and traditional IRA owners age 50 or older:

Tax Year	Catch-up Amountt
2000 - 2005	$500
2006 and thereafter	$!,000

4. Do I Pay Taxes on My Earnings?
No (provided you take the earnings as part of a qualified distribution). That's the best part of the Roth IRA. Unlike a traditional IRA, you cannot take a tax deduction for any of the contributions that you make to a Roth IRA. However, when you're ready to take a withdrawal, you pay no taxes on any of the earnings that your money has generated.

5. What Is a Qualified Distribution?
In order for earnings to be tax free, you must first meet a five-year holding period for your Roth IRA. This period begins with the tax year for which the first contribution is made. After that, any earnings you withdraw for a qualified distribution reason are tax free and IRS penalty free. Qualified distributions include:

• Distributions made on or after the date on which you attain age 59½, Distributions made to your beneficiary (or your estate) upon your death, Distributions attributable to your being disabled, and
• Qualified first-time home buyer distributions (up to $10,000).

6. Does the 10 Percent IRS Premature Distribution Apply if I Withdraw My Money Before Age 59½?
The 10 percent IRS penalty does not apply to earnings you withdraw when you take any of the qualified distributions listed above. In addition, the 10 percent penalty is also waived for certain other distribution reasons. But, for these distributions, taxes on any earnings will apply. Distributions that are subject to taxes (on any earnings withdrawn) but no penalty include:

• Substantially equal periodic payments, Eligible medical expenses in excess of 7.5 percent of your adjusted gross income (AGI), Medical insurance premiums for eligible unemployed individuals, Qualified education expenses, and
• Distributions taken within the first five years for any of these reasons: age 59½, death, disability, or first-time home purchase.

Distributions taken for any reason other than a qualified reason or one of the reasons listed here are subject to both taxes and a 10 percent IRS penalty on any earnings withdrawn.

7. What if I Need Access to My Money Now?
A helpful feature of the Roth IRA is that, for non-qualified distributions, original contribution amounts are returned first. Contributions (as opposed to earnings) are not subject to taxation or the 10 percent IRS premature-distribution penalty when distributed. In other words, you can always get back your principal tax free and IRS penalty free for any reason.

8. When do I Have to Start Taking Distributions From My Roth IRA?
You never have to take distributions from your Roth IRA. That's another benefit of the Roth IRA over traditional IRAs. Assets held in a Roth IRA are not subject to age 70½ required minimum distributions.

9. What Happens in the Event of My Death?
Your named beneficiary(ies) will recieve the entire proceeds of your Roth IRA. The manner in which your beneficiary(ies) recieves the funds is determined by the election made by your beneficiary(ies) within the guidelines of the law.

10. How Do I Move Funds From A Traditional IRA to a Roth IRA?
The law only allows people (single or married) with an MAGI of $100,000 or less to convert or roll over their traditional IRA into a Roth IRA. For a rollover or conversion to a Roth IRA, the amount rolled over or converted will be subject to full taxation. However, the funds will not be subject to a 10 percent premature-distribution penalty. Rollovers from a traditional IRA to a Roth IRA are not subject to the one rollover per 12-months rule.

Conversions/rollovers to Roth IRAs are fully taxable in the year of the distribution.

11. When Is the Contribution Deadline for Funding a Roth IRA?
Roth IRAs for the taxable year can be opened and funded any time between January 1 and the date your tax return is due for the year, excluding extensions. This is normally April 15 of the following year.

12. How Do I Open a Roth IRA?
Simply see any of our IRA representatives. We will explain the nature of these accounts in more detail and help you complete the simple forms necessary to establish your Roth IRA.

Please contact us if you have questions or wish to establish an IRA.

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This information © 1997 Bankers Systems, Inc.