Traditional IRAs

Will you be able to retire comfortably?

Thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001, IRAs today are more flexible, and more people have access to their tax advantages. And, IRAs aren't just for retirement, either. You can withdraw funds from your IRA without tax penalties for qualified educational expenses or to buy your first home.

A Traditional IRA can offer great tax benefits. Your contributions today may be income tax-deductible and taxes on earnings are deferred until withdrawal. With a Farmers Traditional IRA, you get a competitive interest rate and at retirement to provide a lifetime income.

Can you qualify for a Traditional IRA?

If you're under 70 1/2, you may be able to contribute up to $4,000* a year if single, or $8,000* if married. If neither you nor your spouse participate in an employer-sponsored retirement plan, each of you can deduct the full $4,000* IRA contribution for a total of $8,000* a year.

If one spouse participates in an employer-sponsored retirement plan, there are income limits, which gradually phase out income tax deductibility. Full deductibility is available to those whose 2005 modified adjusted gross income (MAGI) is $70,000 or less for joint filers or $50,000 or less for a single taxpayer ($75,000 for tax year 2006 and $80,000 for tax year 2007).

If an individual is not an active participant in an employer-sponsored retirement plan, but his or her spouse is, the income limit for deducting contributions starts at over $150,000 combined MAGI and phases out at $160,000.

*$4,000 maximum annual contribution per individual ($8,000 combined for joint filers) for tax years 2005-2007. A $5,000 maximum annual contribution per individual ($10,000 for joint filers) will be allowed in tax year 2008.

Flexible withdrawal options

•  First home purchase (limited to $10,000)
•  Qualified higher education expenses
•  Death or disability
•  Certain medical or health insurance expenses

The Choice

Making the choice between a Traditional and a Roth IRA is not a difficult one. The factor that you will most consider is the timing of the income tax benefit. With a Traditional IRA, the tax benefit is usually taken when the contribution is made to the IRA. For the Roth IRA, because you cannot take a tax deduction for the contributions made, qualified distributions are tax-free. If you are unable to take a deduction for a contribution made to a Traditional IRA, it may make better sense to contribute to a Roth IRA instead. Should you decide later that you contributed to the wrong type of account, you can always change you mind and move the contributions to the other type of IRA. This is referred to as a "re-characterization." Should you decide to re-characterize your IRA contribution, you must contact your IRA custodian to determine their documentation and procedural requirements.

Your
Name:

Email
Address:

Address &
Zip Code:

Phone
Number: