WHAT IS A ROTH IRA?
It is an IRA which accepts after-tax nondeductible contributions of up to $2,000 annually. Contributions held for five years can be withdrawn tax-free after age 59 1/2. For example, if $20,000 is contributed to the account and it increases in value to $80,000, the owner realizes $60,000 in tax-free earnings at distribution!

Who is Eligible?
Anyone with earned income, regardless of participation in an employer sponsored plan, who falls within the Adjusted Gross Income (AGI) limits. For 1998, individuals with AGI under $95,000, and couples with AGI of less than $150,000 are eligible to make full contributions.

How much can be contributed?
The maximum contribution is the lesser of 100% of earned income or $2,000. The contribution amount will be phased out for individuals with AGI between $95,000 and $110,000, and married couples between $150,000-$160,000. Married couples filing separately are ineligible.

How long can contributions continue?
There is no limit on the number of years contributions may be made since these are after-tax dollars.

When must distributions start?
Since no tax is due, there is no required distribution starting date. Distributions without penalty may start anytime and in any amount after age 59 is reached and the account has been in existence for at least five years.

How are distributions taxed?
Eligible distributions incur no tax, and include distributions after five years for death, disability, age 59 1/2 and first time home purchases. Distributions prior to age 59 1/2 incur a 10% penalty tax unless they are part of a series of substantially equal periodic payments under section 72(t).

What does "five years" mean?
Contributions must remain in the account for at least five tax years from January 1 of the year for which the first contribution is made. It is not necessary to track each contribution for five years.

Can a traditional IRA contribution also be made?
Yes, but the aggregate of contributions to both account types cannot exceed $2,000.

Can funds in a traditional IRA be rolled over to a Roth IRA?
Assets in traditional IRAs can be converted to a Roth IRA if the individual has an AGI of less than $100,000. For conversions in 1998, the amount converted is subject to ordinary income tax but it is payable over four years. After 1998, taxes on conversions will be paid the year of the conversion. Taxpayers who are married and file separately are not eligible for the conversion.

What is the benefit of a Roth IRA if an individual is eligible for a deductible IRA contribution?
Certainly every taxpayer is different and it is important to weigh the advantages of a tax deduction now or tax free withdrawals later. Many financial plans stress the advantages of tax free income at retirement. The Roth IRA is one of the rare sources of this type of income.

How can I open a Roth IRA?
Roth IRAs will be available in 1998. Forms will be available from your bank, broker or other financial institution later this year.