Traditional IRA

Tax Savings, Tax Deferred Earnings, and Retirement Security

Discover the Benefits of the Traditional IRA!

What is the Traditional IRA?
The Traditional IRA is a retirement account that allows you to defer taxes on your earnings until they are withdrawn. Also, certain contributions are tax deductible in the tax year for which they are made (please consult with a tax advisor or attorney).

Am I eligible for a Traditional IRA?
If you are under the age of seventy and a half for the entire tax year and have earned income (or your spouse has earned income), you are eligible to establish a Traditional IRA, even if you already participate in any type of government plan, tax sheltered annuity, simplified employee pension (SEP) plan, savings incentive match plan for employees of small businesses, or qualified plan (pension or profit sharing) established by an employer.

How much can I contribute?

You may contribute any amount up to:

• 100% of your compensation, or
• The contribution maximum limit for the designated tax year, which ever is less (see the chart below).

Tax Year	Under Age 50	Over Age 50
2001	$2,000	$2,000
2002	$3,000	$3,500
2003	$3,000	$3,500
2004	$3,000	$3,500
2005	$4,000	$4,500
2006	$4,000	$5,000
2007	$4,000	$5,000
2008	$5,000	$6,000
2009 and after	$5,000 + COLA*	$6,000 + COLA*

Note: It's important to realize that maximum limit for the designated tax year is the aggregate amount that you can contribute to any Traditional and/or Roth IRA in a given year. For example, if you contribute $1500 to a Traditional IRA, the most you could contribute is $1,500 to a Roth IRA for 2002 tax year if you are under 50 years of age.

When is the contribution deadline for funding a Traditional IRA?
Traditional IRA's for the taxable year can be opened and funded any time between January 1st and the date your tax return is due for the year, excluding extensions. This is normally April 15th of the following year.

Will my contribution be tax-deductible?
Deductibility of your contribution is based on whether or not you or your spouse are active participants in an employer-maintained retirement plan and your Modified Adjusted Gross Income (MAGI). You may be eligible for the maximum deduction, partial deduction, or no deduction. Even if you are not eligible for a deductible contribution, you can still make non-deductible contributions to a Traditional IRA and take advantage of the tax-deferred earnings. Reference the table below for tax-deductible contribution limits.

Federal Income Tax Filing Status	Federal Income Tax Year	Full Deduction Contribution for MAGI up to...	Partial Deductible Contribution for MAGI between...	Non Deductible Contribution for MAGI equal to or above ...
Single QRP Participant	2001	$33,000	$33,000-$43,000	$43,000
	2002	$34,000	$34,000-$44,000	$44,000
	2003	$40,000	$40,000-$50,000	$50,000
	2004	$45,000	$45,000-$55,000	$55,000
	2005 and later	$50,000	$50,000-$60,000	$60,000
Married, Filing Jointly QRP Participant	2001	$53,000	$53,000-$63,000	$63,000
	2002	$54,000	$54,000-$64,000	$64,000
	2003	$60,000	$60,000-$70,000	$70,000
	2004	$65,000	$65,000-$75,000	$75,000
	2005	$70,000	$70,000-$80,000	$80,000
	2006	$75,000	$75,000-$85,000	$85,000
	2007	$80,000	$80,000-$100,000	$100,000
Married, Filing Jointly Non QRP Participant, But Spouse Is	2001 and later	$150,000	$150,000-$160,000	$160,000
Married, Filing Separately Either is QRP Participant	2001 and later	$0	$0-$10,000	$10,000

Do I pay taxes on the earnings?
All earnings on your Traditional IRA contributions (deductible and/or non-deductible) remain tax-deferred until you make withdrawals from the account. They are then taxed as income in the year they are withdrawn.

When can I withdraw funds without incurring any IRS Penalties?
You can withdraw funds from your Traditional IRA without incurring a 10% IRS premature distribution penalty any time after you reach age fifty-nine and a half. You can avoid the penalty before age fifty-nine and a half for the following exceptions:

• Total and permanent disability
• Eligible medical expenses in excess of 7.5% of adjusted gross income
• Health insurance for IRA owners receiving unemployment compensation for 12 consecutive weeks during the current or preceding tax year
• Qualified educational expenses
• Qualified first-time home buyers

How are funds taxed at distribution?
If you are over age fifty-nine and a half, simply include the taxable portion of the amount withdrawn (generally, deductible contributions and all earnings) as income. However, if you are under age fifty-nine and a half, and do not meet one of the exceptions, you must also pay a 10% IRS penalty for premature distributions. The non-deductible portion of the distribution is not taxable when withdrawn nor is it subject to the 10% premature distribution penalty.

When must I withdraw funds?
The year in which you turn seventy and a half, you must begin to take minimum required withdrawals or severe penalties will be imposed.

What happens in the event of my death?
Your named beneficiary(ies) will receive the entire proceeds of your Traditional IRA. The manner in which your beneficiary(ies) receives the funds is determined by the election made by your beneficiary(ies) within the guidelines of the law.

How do I find out more about Traditional IRA's?
Simply see a Customer Service Representative at any Peoples First branch location. We will explain the nature of these accounts in more detail and help you complete the simple forms necessary to establish your Traditional IRA.

For additional information, please contact the  IRA Coordinator at (800) 624-9699 or (850) 770-7000 in Panama City, FL.