A Roth IRA allows you to:

1. accumulate earnings on a tax-deferred basis

2. withdraw earnings tax-free for qualified distributions

Unlike a Traditional IRA, contributions to a Roth IRA are not deductible from your gross income on your federal income tax return. However, since you have already paid taxes on the money you've contributed to the account, contribution dollars can be withdrawn at anytime without tax consequences. Here's more information about Roth IRAs:

Tax advantages
Contribution dollars may be withdrawn at anytime, tax and penalty tax free. Earnings on the account accumulate on a tax-deferred basis and can be withdrawn free from federal income taxes, provided that they are taken according to qualified distribution guidelines.

Eligibility requirements
You must have earned income (compensation) in order to contribute to a Roth IRA. Your adjusted gross income must be within certain limits depending on your tax-filing status -- see table below.

Annual contribution limits
In tax year 2008, you can make annual contributions to a Roth IRA of up to $5,000 or 100% of your earned income, whichever is less. An aggregate of $10,000 can generally be contributed per married couple ($5,000 per IRA) provided that either you or your spouse has earned income of at least that amount. Contribution limits are set according to phase out ranges of your adjusted gross income -- see table below. The $5,000 and $10,000 annual contribution limits apply to the combination of all of your Traditional and Roth IRAs.

If you are age 50 or older, you may make additional "catch-up" contributions to your IRA. Over the next several years, the maximum annual contribution amount will increase as shown in the table below.

Note: Additional "catch-up" contributions have been included in amounts shown for age 50 or older.

* After 2010, the IRA limits are currently scheduled to return to the year 2001 levels, although some observers believe that future legislation may continue the increased limits.

Important: Please note that the states of New Jersey and Pennsylvania have not amended their income tax codes to conform with all of the changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001. If you are a resident of New Jersey or Pennsylvania, increased contribution limits may result in possible adverse state income tax consequences. It is important to verify your state's position on this conformity issue before making contributions to any tax-qualified plans.

Contribution timing
You can make annual contributions to a Traditional or Roth IRA from January 1st through the tax-filing deadline (excluding extensions) for the year, generally April 15.

Distribution guidelines
Contribution dollars can be withdrawn from the Roth IRA anytime, tax and penalty tax free. Earnings can be withdrawn tax and penalty tax free if this or another Roth IRA has been in existence for at least five years and the distribution is made for one of the following:

• after you have attained the age of 59½
• after your death
• on account of your becoming disabled
• to pay for the purchase or construction of your first home ($10,000 lifetime maximum)

Distributions may be taken in specific amounts, as a lump sum, or as a series of systematic payments.

Qualified exceptions for Traditional and Roth IRA distributions

The annual amount you can contribute to a Roth IRA is solely dependent on your adjusted gross income as determined on your federal income tax return. The following table should help you determine whether or not you are eligible to contribute to a Roth IRA:

Visit your Edison Credit Union Member Service Representative to further discuss the benefits of a Roth IRA.

Edison Credit Union does not provide tax or legal advice. You should contact your tax or legal advisor for advice regarding your situation.