What tax advantages does a Roth IRA provide?
Even though contributions to a Roth IRA are not deductible, they are not subject to federal income tax when you take out those monies. In addition, whatever earnings you make on your Roth IRA are paid tax-free (provided certain requirements are met).

How much can I contribute to my Roth IRA?
The amount you may contribute each year to your Roth IRA increases over time. Individuals age 50 and over benefit from higher limits, allowing those closest to retirement to save even more.

The following chart shows the new higher Roth IRA contribution limits:

*Subject to cost-of-living adjustments (COLAs) in $500 increments

(Note: If you contribute to both a Roth and a Traditional IRA, your total combine contributions may not exceed the limits shown above. For example, for 2010, if you are age 50 or older, you may contribute $6,000 to a Roth IRA or a Traditional IRA, but if you contribute to both, the total contribution to both will be limited to $6,000.)

Your Roth IRA contributions are limited to 100% of compensation. To make a regular contribution of $5,000 for 2010, you must earn at least $5,000 in 2010. However, if you meet certain qualifications, you may be able to base your Roth IRA contributions on your spouse's compensation.

Good news for Traditional IRA owners! Starting in 2007, you can have your federal income tax refund deposited directly to your Roth IRA!

Does my tax-filing status or income level affect how much I may contribute?
Yes. Depending on whether you are single, married and filing jointly, or married and filing separately, your contributions may be limited or disallowed if your modified adjusted gross income (MAGI) is above a certain amount. The following chart outlines these limitations:

*COLA will be made in $1,000 increments.

Are contributions to a Roth IRA not allowed at a certain age?
No. Unlike a Traditional IRA, there is no maximum age for making a Roth IRA contribution. Turning age 70½, or any other age, does not prohibit you from contributing. However, your annual contributions still may not exceed the amount of your compensation for the year.

Can I convert a Traditional IRA to a Roth IRA?
If you are single or married, filing jointly, and your MAGI for the year does not exceed $100,000 (not including the amount of IRA assets converted to a Roth IRA or your required minimum distribution, if any), you may convert part or all of your Traditional IRA to a Roth IRA.
While the conversion of a Traditional IRA to a Roth IRA is generally treated as a taxable distribution for the year of the conversion, the IRS 10% early distribution penalty does not apply.
Example: George, who is age 53, converts a Traditional IRA to a Roth IRA in 2007. The taxable amount of the conversion is $40,000. George must include this amount as income for 2007. However, even though George is under age 59½, he is not subject to the IRS 10% early distribution penalty.

What happens when I take money out of my Roth IRA?
Distributions from Roth IRAs are classified in three ways and paid in the following order: (1) regular and spousal contributions, (2) conversion contributions, and (3) earnings.
Regular and spousal Roth IRA contributions may be withdrawn tax-free and penalty-free, regardless of when the contribution was made, how old you are, or why the distribution is being taken.

Conversion contributions are also distributed tax-free, regardless of age or how long they have been held in the Roth IRA. However, conversion amounts may be subject to the IRS 10% early distribution penalty if withdrawn before age 59½ and within five years of conversion.

Earnings are tax-free and penalty-free if they are distributed in what's called a qualified distribution. A qualified distribution is paid:
After you reach age 59½,
If you become disabled,
If you are using the money for a qualifying first home purchase, or
To your beneficiary after your death.

AND after the five-year period beginning with the earlier of:
The first year for which you made a regular or spousal Roth IRA contribution, or
The first year in which you made a conversion contribution.

If the distribution is not a qualified distribution, the earnings are taxable and, if you are under age 59½ when they are distributed, they will be subject to the IRS 10% early distribution penalty, unless an exception applies.

Important! The tax rules are often complicated. This brochure is meant solely as an overview. Before making any investments, you should confer with a qualified tax advisor.

Security Federal Savings Bank is a mutually owned Communtiy Bank serving Cass, Howard and the immediate surrounding counties in North Central Indiana.

Locations

Downtown Logansport	East End Logansport	Kokomo	Delphi
314 Fourth Street	300 Mall Road	519 Markland Ave.	1260 S. Washington
(574) 722-6261	(574) 722-3826	(765) 457-1161	(765) 564-3000