IRA'S

At First State Bank Southwest we offer six different types of IRA's. We offer the Traditional, Roth, Simple, Educational, SEP and Health Savings Accounts. An IRA is a savings plan that lets you prepare for retirement. Your contributions may be tax deductible.

TRADITIONAL IRA

The Traditional IRA is an account which allows you to defer taxes on your earnings until they are withdrawn.

• May contribute up to $5,000 for tax years 2008.
• May be tax deductible.

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ROTH IRA

A Roth IRA allows only nondeductible contributions but features tax-free withdrawals for certain distribution reasons, after a five year holding period.

• May contribute up to $5,000 for tax year 2008.
• Not tax deductible

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SIMPLE IRA

A Simple IRA is an employee salary deferral plan that requires a limited employer contribution. Though it is like a 401(K) in operation, it is easier because it does not require any special discrimination testing.

• Eligibility for Establishment is 100 or fewer employees; no other plans; October 1 deadline

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CESA (COVERDELL EDUCATION SAVINGS ACCOUNT)

The Coverdell Education Savings Account is a nondeductible account that features tax-free withdrawals for a very specific purpose - a child's education expense.

• Total aggregate contribution into one or more CESA's on behalf of a child is $2,000 a year.
• Contribution depends on your MAGI (modified adjusted gross income.)

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SEP IRA

A Simplified Employee Pension (SEP) plan is a business retirement plan that uses individual retirement account (IRA's) as the investment vehicle. (An employer contributes money into its employee's traditional IRA's.) The employer gets a tax deduction, and the contribution is not income to the employee until distributed from the IRA.

• SEP has higher contribution limits.
• An employer (whether incorporated or unincorporated; full-time or part-time) is eligible to establish a SEP plan.

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