The New Array Of IRAs

Here's a tax break that just got better. B.E. checks out the new rules and regulations helping you save for retirement helping you save for retirement or college. .

decide to use the money for something else,” he says.

SIMPLE-IRA.
SIMPLE-IRAs are another option for the self-employed or small business owners with up to 100 employees. With a SIMPLE-IRA, you can contribute (and deduct) up to $6,000 per year by reducing your compensation, as long as you earn at least thee much. If a SIMPLE-IRA is sponsored by a company you run, you and any family members you employ may make pretax contributions up to $6,000 to their own accounts, regardless of whether any employees elect to make contributions. However, your company must match any employee contributions up to 2% or 3% of their salaries.

“Even if your employees defer little or none of their earnings you and selected others can contribute the maximum,” says Roger Lusby, a partner in Frazier & Deeter in Atlanta. .

A SUCCESSFUL ROLLOVER
Ever wonder what happens to your 401 (k) money when you leave a job? Most likely the people in employee benefits will tell you about an option available to you to take all money from the 401 (k) and “roll it over” into an IRA. Lester Bumbrey, 53, a configurations management specialist in Glen Burnie, Maryland, has been the victim of corporate downsizing a couple of times in his career. “I was careful,” Bumbrey says, “because the last thing I wanted to do was get hit with that 25% withholding trap.”

It’s a simple procedure. Ideally, have your employer make the check out to the financial institution trustee on your behalf. Under current tax laws, the 60-day grace period for rollovers is no longer available. Windsor Dennis, M.D., for example, an orthopedic surgeon in New Orleans, dissolved his professional corporation during the 1980s and rolled his retirement plan into an IRA with the help of Randy Waesche, a financial advisor who heads Resource Management in New Orleans.

Careful, though. You’re in for a nasty surprise if you don’t follow set procedures. “Set up an IRA account and ask your employer for a `trustee-to-trustee’ rollover,” says Bumbrey’s financial advisor, Larry Grabenstein. “The money will go directly from your employer’s plan to your rollover IRA; you never touch a penny of it. In that case, no money needs to be withheld and you save yourself from a huge tax headache.”

THE IRA ARRAY

Salary Limit

Full Deduction

Phase-out Limit

Type

Contribution Limit
(per person)

Single

Married
(filing jointly)

Single

Married
(filing jointly)

Deductible IRA

2000

30000

50000

$30,001-$40,000

$50,001-$60,000

Roth IRA

2000

95000

150000

$95,001-$110,000

$150,001-$160,000

Education IRA

500

95000

150000

$95,001-$110,000

$150,001-$160,000

SEP-IRA

13.04% of your income as a contractor

None

None

None

None

SIMPLE-IRA

6000

None

None

None

None

RAISING THE CEILING

Although you can contribute $2,000 annually to an IRA, whether that contribution will be deductible

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