It’s probably been a few years since you’ve thought seriously about an Individual Retirement Account, but there are four new reasons to look at IRAs again.

1. The new Roth IRA may be the best IRA ever. It lets you contribute $2,000 each year — and you never pay federal income taxes. You don’t get an immediate tax deduction as with the Traditional IRA, but if you meet the eligibility requirements, what you get can be even more valuable: tax-free compounding and, after five years, qualified distributions can be withdrawn tax-free. In a Traditional IRA, you get the compounding but pay taxes when you take money out.

2. Congress has raised the eligibility limits for a Traditional IRA tax deduction — to $40,000 in adjusted gross income for individuals or $60,000 for couples. Those amounts will go up every year, so if you aren’t eligible now you may be soon. Of course, there aren’t any income limits if you don’t have a retirement plan at work.

3. You can now contribute a full $2,000 (instead of $250) to a nonworking spouse’s IRA. And if your spouse doesn’t work or isn’t covered by a retirement plan at work, the eligibility limits for an IRA deduction rise from $60,000 to $160,000 per couple. In the 28% tax bracket, that means a $2,000 contribution costs you only $1,440 because of the value of the tax deduction.

4. You can convert a Traditional IRA or, with a little extra work, a company retirement plan distribution to a Roth IRA and benefit from the new tax-free status. You pay income taxes on the amount you convert, but over time the subsequent tax-free growth may more than compensate. If you convert during 1998, there’s an added benefit: You pay the taxes over four years!

The New Roth Account in many states is exempt from Legal Actions - creditors, etc.   The Medical Savings Account is also exempt from legal actions in most states.   You should ask about your state.

I’m contacting all of my clients — and everyone else I can think of — about this exceptional opportunity. Most people will need help deciding which IRA is best for them. The new law is complex, but one thing is certain: A tax break this good is a terrible thing to waste.

I look forward to speaking with you soon.

Sincerely,

Bob Parrish