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Open an IRA Account

We will help you Rollover your 401(k) savings to an IRA.

What Does I.R.A. Really Mean?

Well, in this country, we’re not referring to the Irish Republican Army. Actually, we’re talking about an Individual Retirement Account. Or an Individual Retirement Annuity (see below)… and even these terms can be confusing. After all, what does an Education IRA have to do with retirement? And who is that Roth guy, anyway? Isn’t “Rollover” something my dog does? Let’s take a closer look.

First, one thing most IRAs have in common is special tax treatment. That might mean tax-deferred growth (which means you don’t pay taxes on your investment or its earnings until you withdraw the money) or tax-free growth, which means you’ve already paid the taxes on your IRA investment, but (as long as you follow certain guidelines), you won’t pay taxes on your investment earnings when you make a withdrawal. See the box below for more clarification and important information about how different IRAs work in relation to each other and the tax codes, and clarification about special tax treatments.

The other feature that brings these – seemingly dissimilar – arrangements together is that the “I” in IRA stands for “Individual”. An IRA is an arrangement you make for yourself, not through an employer – like a payroll-deduct retirement plan, or flexible spending account. To the general public, the term “IRA” has come to mean, simply, a personal account that enjoys some sort of special tax treatment (again, see the box below for important clarifications).

That said (or written!), let’s take a look at the different kinds of IRAs that are available to you:

  Traditional IRA Roth IRA Rollover IRA Coverdell Education Savings Account
(formerly Education IRA
Who's Eligible People not covered by an employer's retirement plan Based on income, may participate in employer's plan Participants in an employer plan who are changing employers or retiring. Rollovers are also accepted from other IRAs and Roth IRAs and Simplified Employee Pension (SEP) Plans Beneficiaries under age 18 (Education IRAs cannot accept contributions on behalf of beneficiaries older than 18)
Key Feature Tax- deferred investment and earnings growth Tax-free investment growth Protects Tax-deffered status of Employer Plan. Tax-deffered growth of investment earnings; Tax-free widrawals for qualified education expenses
Contribution Limit
(Pre-tax eligibility subject to income limit)
2002-2004: $3,000
2008-2010(1): $5,000
2002-2004: $3,000
2008-2010: $5,000
No limit ( for pre-tax rollovers) See traditional or Roth IRA for yearly limits for additional contributions Up to $2,000 per year (except for rollovers from other Education IRAs); subject to income limitations
Tax deductible contributions Yes, depending on income No Yes depending on income No
Minimum age to start taking income
(Without penalty)
Age 59 ½ Age 59 ½ Age 59 ½ n/a
Must start taking withdrawals by Age 70 ½ n/a Age 70 ½ Age 30 (Remaining funds may be rolled into a Coverdell Account for Another beneficiary
Withdrawals taxable? Yes, on earning and Pre-tax contributions No, if funds invested five or more years Yes, on earnings and pre-tax contributions Not if withdrawn for qualified education expenses

(1) After 2008, indexed in $500 increments for cost-of-living adjustments.

Important Definitions and Information about IRAs

Tax-deferred – This means you don’t pay taxes on your IRA investment, or its earnings, until you actually withdraw your money. IRAs and other qualified plans already offer the same tax-deferral feature found in annuities. Your investment is taxable at withdrawal, and may be subject to an additional 10 percent early withdrawal penalty if you withdraw it before you reach age 59 ½.

Tax-free growth – With a Roth or Education IRA, you’ve already paid taxes on the money you invest in your IRA, and you pay no taxes on its investment growth, assuming (with a Roth) that it’s been invested for at least five years and you’ve reached 59 ½, or (with a Coverdell Education Savings Account) that it’s withdrawn for qualified educational expenses.

Annuity – An insurance contract that usually offers a range of investment options, benefits and features. For example, you can purchase guaranteed death benefits or payout options, which are based on the claims-paying ability of the issuing insurance company. For additional fees, you can choose death benefit protection and the ability to receive a life-time income.

Timing – Isn’t – Everything!

Market timing. Excessive or frequent trading. Mutual fund scandal. These phrases, and the actions they represent, have consumed the recent media. Careers in the financial arena are crumbling as companies are accused of abuses and regulatory agencies are bearing down with increased scrutiny on the practices and managers who have accommodated them.

At the highest level, “market timing” means attempting to follow market activity to successfully “buy low” and “sell high.” The term is typically used for people who quickly buy and sell securities to grab profits from short-term price changes. But it’s a little different in mutual funds, which are usually geared to long-term investors – people investing for retirement or education costs. When someone trades in and out of a fund too frequently, it may hurt the fund’s overall performance and burn other shareholders practicing disciplined long-term investing.

While market timing is not illegal, many funds have increasingly discouraged the practice because it threatens to increase costs, hurt fund performance and disadvantage long-term shareholders, because money doesn’t stay invested in the fund. It flows in one day and out the next. That means the funds need to hold additional cash reserves to cover the frequent trading, with fewer dollars available to invest on behalf of all shareholders. Excessive trading can also result in higher transaction costs, which increase the fund’s expenses, and potentially reduce returns for the long-term investor.

IRA stands for:

A) Irish Republican Army
B) Individual Retirement Account
C) Interest Receiving Account

A Rollover is:

A) Moving money from one tax-favored plan into another
B) Something you teach your dog Rover to do
C) Something you can only do with an IRA

Market Timing is:

A) Calculating how long it takes you to walk from one end of the NYSE floor to the other
B) Leaving your stock investments in the market until you reach your financial goals
C) Practicing “buy low, sell high” on a minute-to-minute basis, jeopardizing fund trading privileges

A Coverdell Education Savings Account is:

A) The same thing as a 529 Plan
B) An IRA that can be used as a shorter-term investment for goals like tuition funding
C) How the Coverdell family saves for tuition

Tax-deferred growth means:

A) The growth of your investment is halted until you pay taxes
B) You no longer need an accountant
C) You don’t pay taxes on your investment until the money is withdrawn

IRA stands for… Answer: B A Rollover is… Answer: A Market Timing is…Answer: C
An Education IRA is… Answer: B Tax Deferred growth means… Answer: C

Please note that the precise coverage afforded is subject to the terms, conditions, and exclusions of the contract as issued. This explanation is intended only as a guideline. This information is not intended to be considered investment, tax or legal advice. It is provided, for your education only. This is not an IRA contract. All terms and coverages are defined solely by your policy.

For more details, please call a PaulBalep representative toll-free 1-800-964-8614 to receive a free, no-obligation proposal. Like so many satisfied clients, we think you’ll be happy you did. And to set up a meeting to discuss additional insurance and financial goals: Visit us online at, or e-mail us at

“It pays to shop around with PaulBalep Your one stop shop for insurance and financial services”

<<Independence is number one>>
. We are nonexclusive producers who represent an average of eight companies-not just one. PaulBalep can evaluate and compare the products of several fine companies to find you the right combination of coverage and value.











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