An Individual Retirement Account (IRA) is an excellent tool for retirement savings. Unlike most investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free. Tax law changes have made IRAs even better. Consult your tax advisor.

CONTRIBUTION DEADLINES
Traditional IRAs and Roth IRAs must be opened and/or funded by the April 15th tax filing deadline to receive your tax deductions. A filing extension won’t buy you time.

TRADITIONAL IRA
The annual contribution limit is $4,000. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments. The annual limit applies to any combination of IRA plans. Contributions are fully tax deductible if you are not an active participant in an employer retirement plan. Investments grow on a tax-deferred basis. Distributions must begin at age 70 1/2. Earnings are taxed only upon withdrawal.

ROTH IRA
As long as you have earned income, you can establish and contribute to a Roth IRA even after age 70 1/2. While contributions are not tax deductible, contributions and earnings can be withdrawn tax-free, and unlike traditional IRAs, you are not required to begin taking minimum distributions after reaching age 70 1/2. By converting your traditional IRA to a Roth IRA, you can enjoy tax-free withdrawals. However, the amount you convert is subject to income tax now.

MAKING-UP FOR LOST TIME
Catch-up contributions-Individuals who have reached age 50 by the end of the year will be able to make additional catch-up contributions of $1,000 per year to their traditional or Roth IRA.