Q. With the introduction of the Roth IRA what do we call the existing IRA?
A. Most commonly it is referred to as a "traditional" or "ordinary" IRA. However, you will find it also referred to as a "classic" or "regular" IRA. We will refer to it as a "traditional" IRA in our website.

Q. What is the difference between a Roth IRA and a traditional IRA?
A. The difference between a Roth IRA and a traditional IRA is the treatment of the contributions both on the front end and when withdrawn. A traditional IRA offers the potential of a deductible contribution, being that the contributor qualifies, and when deductible, withdrawals are then fully taxable.

Roth IRA contributions are totally nondeductible, and thus qualifying withdrawals are totally tax free.

Q. How do I know if I am eligible for an IRA?
A. Many people are eligible for all three types of IRAs, although others may not be. To find which IRAs you are eligible for click here or on the calculators link above. Here you will have access to a variety of calculators that can assist you in deciding which investment choices may be right for you.

Q. What are the income limits for fully deductible contributions to a "traditional" IRA?
A. For participants in employer sponsored retirement plans:B>

1). the income limits to make fully deductible contributions will gradually increase each year to the year 2005 when it will be $50,000 to $60,000 for single taxpayers, and to the year 2007 when it will be $80,000 to $100,000 for joint filers.
2). A non-working spouse may contribute a fully deductible IRA even when the spouse participates in an employer-sponsored retirement plan. To be eligible, a family's adjusted gross income must be below $150,000.

Q. When may I withdraw money from either IRA?
A. With an ordinary IRA, the 10% early withdrawal penalty, prior to age 59 ˝, will not apply when the distribution is used to pay for college expenses or for a first time home purchase up to $10,000. To qualify for this penalty and tax-free distribution under a Roth IRA, the account must be held for a minimum of 5 years, and only withdrawals of the contributions are tax free.

Other exceptions that allow penalty-free (and sometimes tax-free) pre-retirement withdrawals are:

· deductible medical expenses,
· health insurance premiums (when unemployed),
· death or disability,
· when taken as a life annuity.

Q. Can I rollover my "traditional" IRA to a Roth IRA?
A. Yes, although a rollover from a traditional IRA to a Roth IRA is not tax free. Although there is no penalty (10% early withdrawal), the investor who converts to a Roth IRA must pay regular income tax on the entire rollover amount, minus any nondeductible contributions that may have been made. This tax is paid in the year the rollover occurs.

Q. Can the tax that must be paid when I roll my "traditional" IRA to a Roth IRA be deducted from the rollover amount?
A. Yes, however, as this is money that has not been rolled over to the Roth IRA, it is subject to the 10% penalty tax if the investor is under the age of 59 1/2.

Q. The Coverdell Education Savings Account ...what is it?
A. A Coverdell Education Savings Account is a savings account created as an incentive to help parents and students save for education expenses.

· The total contribution for a beneficiary under the age of 18 (or qualifies as a special needs beneficiary) of an account may not be more than $2,000 in any year, no matter how many accounts have been created. The beneficiary will not owe tax on the distributions if, for a year, the distributions from an account do not exceed the beneficiary’s qualified education expenses at an eligible education institution. The benefit applies to higher education, elementary and secondary education expenses.
· In most cases an individual or the beneficiary may contribute to a Coverdell ESA if the individual's modified adjusted gross (MAGI) income is less than $110,000 or $220,000 when the individual is filing a joint return. The $2,000 maximum contribution per beneficiary is gradually reduced if the contributor's MAGI is between $95,000 and $110,000 or $190,000 and $220,000 if the contributor is filing a joint return.
· Visit the IRS site for rules on determing your MAGI for the purpose of determining your maximum contribution limit: http://www.irs.gov.
· Distributions are tax-free as long as they are used for qualified education expenses. These include tuition, books, fees, etc. at an eligible educational institution. Eligible educational instituions include public, private or religious schools that provide elementary or secondary education as determined under state law.
· The Hope and lifetime learning credits can also be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Refer to IRS Publication 970 for more details. Vist: http://www.irs.gov. If a distribution exceeds education expenses a portion will be taxable to the beneficiary and will be subject to an additional 10% penalty tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary has received a qualified scholarship.
· Any remaining balance in a Coverdell ESA must be distributed within 30 days from the time the beneficiary reaches age 30. The earnings on the account will be taxable and subject to the additional 10% penalty tax. A beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.

Disclosures
MEA Financial Services/Paradigm Equities, Inc. does not give tax or legal advice. The comments regarding the law and tax treatment simply reflect our understanding of current interpretations of such laws. Since laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.

Prior to making any adjustment to your current IRA accounts, please consult a tax advisor to learn how these changes may affect your investment decisions.