A Traditional IRA is a tax advantaged retirement vehicle for individual investors. It’s attractive to many investors because contributions grow tax deferred. In addition, some investors, depending on their income and their ability to participate in an employer sponsored retirement plan, are also able to make tax-deductible contributions to the account.

Tax-Deferred Advantages
When saving for retirement, you want every investment advantage you can get — and one of the biggest is tax deferral.

Earnings on your IRA investments are tax deferred, and will accumulate faster than if they were held outside an IRA.

When you do begin to take withdrawals — usually in retirement — you will have to pay taxes on the distributions. You may, however, be in a lower tax bracket; therefore, your total tax obligation could be less than it would have been with the taxable investment.

Contribution Limits
Anyone who has earned income or is married to someone with earned income may contribute to an IRA. The annual contribution limit for a single person is the lesser of 100% of compensation or $4,000. The combined limit for a married couple may not exceed the lesser of 100% of their combined compensation or $8,000 with $4,000 being each individual limit. In addition, in 2006, individuals who are age 50, or older, may contribute an additional $1,000 to their IRA.

Penalty-Free Withdrawal Options
Your IRA is a retirement savings vehicle — it wasn’t designed to help you pay for short-term goals. In fact,up until 1998, you would have had to pay a 10 percent penalty—in addition to applicable taxes — on most withdrawals you made before age 59-1/2. But now, if you qualify, you can take penalty-free “special purchase” withdrawals from your IRA including:

First home — You may withdraw up to $10,000 during your lifetime to help pay for a primary residence for yourself, your parents, grandparents, spouse, child or grandchild. This withdrawal is usually allowed if the home purchaser hasn’t owned a primary residence for the past two years.

Higher education — You can make penalty-free withdrawals for qualified college expenses, such astuition, fees, books, supplies, equipment, and room and board.

Although you may be able to take these distributions without paying a penalty, you will still owe incometaxes on your IRA’s earnings and deductible contributions. Consult with your tax advisor beforemaking any withdrawals.

IRA Fund Vehicles
You can fund your IRA with virtually any type of investment, including mutual funds, common stocks,corporate and government bonds, annuities and more. The investments you select will depend on yourindividual needs, your tolerance for risk and your time horizon — how long you have until retirement.

Tamarack does not provide tax or legal advice. Please consult your financial advisor or tax advisor for more detailed information, or for advice regarding your individual situation.