Keep the Money, Honey


	It's "T" time again ladies and gentlemen, and I don't mean the kind where you hold up your pinkie, sip and munch on crumpets. I mean it's the really big "T", as in tax time, that tiresome life's duty we have to live by. So, if you have any cash left, having bought the evening gown, earrings, shoes and a bag to match, here is a tip or two what to do with the pocket change. Lynn Mathre, CPA and principal of Asset Management Advisors, Inc., explains, simplifies and answers some questions, we just know are burning your financial mind. What is an IRA (Individual Retirement Account)? A traditional IRA, or Individual Retirement Account, is a tax-deferred personal retirement fund. You can contribute up to $2,000 a year, assuming your earned income from work is $2,000 per year or more. Depending on how much you earn and your marital status, the money you invest may be tax-deductible (deductible IRA) or not (non-deductible IRA). What is the difference between a deductible and a non-deductible IRA? For Traditional IRAs you can fully deduct your contribution if: Neither you nor your spouse participated in a company-sponsored retirement plan, such as 401(k). You contributed to a company-sponsored retirement plan and are: Single and earned $31,000 or less for 1999 or Married and, filing jointly, had a joint income of $51,000 or less for 1999. Your contribution is partially deductible if you contributed to a company-sponsored retirement plan and you're: Single and earned $31,000-$41,000 for 1999 or Married and, filing jointly, had a joint income of $51,000-$61,000 for 1999. Your contribution is not deductible at all if you contributed to a company-sponsored retirement plan and are: Single and earned $41,000 or more for 1999 or Married, filing jointly, and had a joint income of $61,000 or more for 1999. Why should I contribute to an IRA if I can not deduct the contribution? One of the significant advantages of an IRA is the tax-deferred growth before you retire and begin distributing the money. Many taxpayers are in a higher tax bracket before retirement than after they retire. Therefore, the impact of tax deferral compounds at a higher rate. For example, $2,000 that grows for 30 years at 10% without current taxation will grow to almost $40,000. That same $2,000, burdened by taxes of 25% (2.5% of 10%) will not total $20,000 during the same period. As you can see tax deferral can be very important to almost all individual investors. What is a Roth IRA? A Roth IRA is a tax-deferred retirement account. Although retirement contributions are not tax deductible at the time you contribute, withdrawals can be made completely tax-free once you reach age 59 1/2. The Roth IRA allows investors to effectively eliminate taxes on money for retirement. Although the annual contribution limit is the same for both accounts, because your Roth IRA contribution is made with after-tax income, the full $2,000 can compound substantially over the years -- without incurring any future tax liability. A significant advantage of a Roth IRA compared to a traditional IRA is the lack of distribution requirements when you turn 70 1/2. Traditional IRA's are subject to required distributions. These distributions must start no later than April 1 the year after you turn 70. Because Roth IRA's do not require distributions, your tax deferral can last for your lifetime. A significant advantage for women whose life expectancy is longer than for men. You're welcome!
	Should you have any comments, scoop, ideas or wish to submit any information to be featured, please eMail it to societyspy@pdq.net or forward to: Alicia A. vonGreisman SocietySpy.com Sage Plaza 5161 Sage Plaza, Suite 320 Houston, Texas 77056