TRUST IN PROVIDENCE

IRA’S and ROTH IRA’S

The Providence Association offers two forms of Individual Retirement Accounts to the public: IRA’S an ROTH IRA’S. In each instance an annuity is used as the funding vehicle. Currently Providence pays interest at the rate of 5.25% annually. This rate will always compare favorably with standard CD’s; however, a minimum rate of 3% is guaranteed no matter how low CD rates might go in the future.  The Providence investor never has to worry about renewal dates and can always make additional deposits.

IRA’s – The federal government has increased the deposit limit for income earners under the age of 70.5 to $5,000 for the tax year 2006. A similar deposit can be made for the income earner’s spouse. Such deposits generate a deduction on the investor’s tax return and interest earnings accumulate tax free. Although withdrawals are subject to income tax, they are usually made after the investor has retired and is in a lower tax bracket. Withdrawals before age 59.5 incur a 10% excise tax penalty and are subject to ordinary income tax with several exceptions noted below. The proceeds from 401(k)’s or other qualified pension plans, upon distribution, can be easily “rolled-over” into a Providence IRA.

Roth IRA’s – Although deposits into Roth IRA’s are not tax-deductible, withdrawals after age 59.5 and 5 years are completely tax-free. If a person owns an individual IRA and a Roth IRA, combined contributions into both cannot exceed $5,000. There are also some limitations associated with the investor’s income and his participation in other qualified retirement plans. Unlike the case of traditional IRA’s, the contribution period in a Roth IRA may exceed age 70.5 and there are no minimum distribution rules at that time.

IRA Withdrawals – The 1997 Tax Relief Act allowed withdrawals from all IRA’s in the following circumstances: 1.) For tuition for higher education; and 2.) For qualified first-time homebuyers ($10,000 maximum. In addition, withdrawals from traditional IRA’s are permitted to cover long-term disabilities and excessive medical expenses stemming from illnesses without a prognosis of recovery.

Supplemental Annuity – Although IRA’s and Roth IRA’s are wonderful vehicles for retirement savings, because they generate either tax deductions or tax-free distributions, respectively, their greatest limitation stems from the restrictions on the amount of annually permitted deposits. A wise investor will also purchase a Flexible Premium Deferred Annuity for the purpose of accommodating additional retirement income and/or wealth for future generations.

TRUST IN PROVIDENCE

FOR YOUR RETIREMENT AND WEALTH ACCUMULATION SAVINGS

The Providence Ass’n . 817 N. Franklin St. . Phila. PA. 19123