In this section: Which IRA Is Right for You? Roth IRAs: To Convert or Not? The IRA Super Page Retirement Accounts for the Self-Employed

Who's Eligible?

TAX-DEDUCTIBLE IRA
	Any single person who has not actively participated in or qualified for an employer-sponsored retirement plan at any time during the year (including a self-employed plan set up for that person). A single person who actively participates in an employer-sponsored retirement plan and who has an AGI below $44,000 for 2002 ($50,000 for 2003), subject to phase-out rules. Any married person when neither spouse actively participates in an employer-sponsored retirement plan. Both spouses when a joint return is filed, both are active participants in employer-sponsored retirement plans and joint AGI is below $64,000 for 2002 ($70,000 for 2003), subject to phase-out rules. A married person who actively participates in an employer-sponsored retirement plan but whose spouse does not, provided the couple files jointly and has AGI below $64,000 for 2002 ($70,000 for 2003), subject to phase-out rules. A married person who does not actively participate in an employer-sponsored retirement plan but whose spouse actively participates in such a plan, provided the couple files jointly and has joint AGI below $160,000 (subject to phase-out rules). A married person filing separately with AGI below $10,000 (subject to phase-out rules) who actively participates in an employer-sponsored retirement plan or who has a spouse who actively participates. A married person who: (a) files a separate return, (b) has been separated from the spouse for at least one year, (c) is an active participant in an employer-sponsored retirement plan and (d) meets the AGI rule for singles in item 2 above. Note: In all cases, the taxpayer must have earned income (from compensation or self-employment activities) at least equal to the amount contributed to the IRA. For married couples filing jointly, either spouse can have the requisite earned income.
NONDEDUCTIBLE IRA
	Anyone — regardless of AGI level — provided he or she has earned income at least equal to the amount contributed to the IRA.
ROTH IRA
	Any single person with an AGI below $110,000 (subject to phase-out starting at $95,000). Married people filing jointly with AGIs below $160,000 (subject to phase-out starting at $150,000). Married people filing separately with AGIs below $10,000 (subject to phase-out starting at zero). Note: In all cases, the taxpayer must have earned income (from compensation or self-employment activities) at least equal to the amount contributed to the Roth IRA. For married couples filing jointly, either spouse can have the requisite earned income.

How Much Can I Contribute?

TAX-DEDUCTIBLE IRA
	The maximum deductible contribution is the lesser of earned income or $3,000 ($6,000 for married couples filing jointly), but this deductible-contribution maximum is subject to the following phase-out rules: If you are single and an active participant in an employer-sponsored retirement plan (including a self-employed plan set up for you), the AGI phase-out range $34,000 to $44,000 for 2002 ($40,000 to $50,000 for 2003). For example, if your 2002 AGI is $36,000, your maximum deductible contribution is $2,400. If you are single and not an active participant, your maximum deductible contribution is $3,000, regardless of your AGI. If you are married, and both you and your spouse are active participants, the joint AGI phase-out range for deductible contributions for both of you is $54,000 to $64,000 for 2002 ($60,000 to $70,000 for 2003). For example, if your 2002 AGI is $56,000, your maximum deductible contribution is $2,400 ($2,800 if you will be age 50 or older at year-end). If you are married, and your spouse is an active participant, but you are not, the joint AGI phase-out range for your deductible contribution is $150,000 to $160,000. If you are married, and you are an active participant, but your spouse is not, the joint AGI phase-out range for your deductible contribution is $54,000 to $64,000 for 2002 ($60,000 to $70,000 for 2003). If you are married, and neither you nor your spouse is an active participant, both of you can contribute and deduct up to $3,000 (total of $6,000) regardless of your AGI. If you are married and filing separately, and either you or your spouse is an active participant, the AGI phase-out range for your deductible contribution is $0 to $10,000. If you are married and filing separately, have been separated from your spouse for at least one year and are an active participant, the AGI phase-out range for your deductible contribution is $34,000 to $44,000 for 2002 ($40,000 to $50,000 for 2003). If you are not an active participant, you can contribute and deduct up to $3,000 regardless of your AGI ($3,500 if you will be 50 or older at year-end). Note: In all cases, the taxpayer must have earned income (from compensation or self-employment activities) at least equal to the amount contributed to the IRA. For married couples filing jointly, either spouse can have the requisite earned income.
NONDEDUCTIBLE IRA
	The maximum contribution is the lesser of earned income or $3,000 ($3,500 if you will be age 50 or older at year-end). This contribution is not tax-deductible.
ROTH IRA
	The maximum contribution is the lesser of earned income or $3,000 ($3,500 if you will be age 50 or older at year-end). The maximum contribution is phased-out between the following AGI levels: If you are single, $95,000 to $110,000. If you are married filing jointly, $150,000 to $160,000. If you are married filing separately, $0 to $10,000. Note: In all cases, the taxpayer must have earned income (from compensation or self-employment activities) at least equal to the amount contributed to the Roth IRA. For married couples filing jointly, either spouse can have the requisite earned income.

What Tax Will I Pay On Retirement Withdrawals?
Taxes Due After Age 59 1/2

TAX-DEDUCTIBLE IRA
	Income tax due on earnings and original contributions.
NONDEDUCTIBLE IRA
	Income tax due on earnings (original contributions are withdrawn tax-free).
ROTH IRA
	No tax due if funds are held in the account for at least five years and you are at least age 59 1/2. Total amount of annual contributions can be withdrawn tax-free and penalty-free at any time.

Early Withdrawal -- Higher Education

IRA TYPE		10% PENALTY	INCOME TAX DUE
	Tax-Deductible IRA	No	Yes
	Nondeductible IRA	No	On earnings, not original contributions.
	Roth -- Less than five years old.	No	On earnings, not original contributions.
	Roth -- Less than five years old.	No	On earnings, not original contributions.
	Higher-education expenses must be for you or your family members. Expenses include tuition, fees, room and board (if the student is enrolled at least part time), books and supplies.

Early Withdrawal -- First-Time Home Purchase

IRA TYPE		10% PENALTY	INCOME TAX DUE
	Tax-Deductible IRA	No	Yes
	Nondeductible IRA	No	On earnings, not original contributions.
	Roth -- Less than five years old.	No	On earnings, not original contributions.
	Roth -- More than five years old.	No	No
	Limit is for $10,000. To qualify, you must not have owned a home for the past two years. This exemption can be used to buy, build or rebuild a first home for you, your parents, your children or your grandchildren. If you use only part of your exemption, you can use the remainder another time.

Early Withdrawal -- Death or Disability

IRA TYPE		10% PENALTY	INCOME TAX DUE
	Tax-Deductible IRA	No	Yes
	Nondeductible IRA	No	On earnings, not original contributions.
	Roth -- Less than five years old.	No	On earnings, not original contributions.
	Roth -- More than five years old.	No	No

Early Withdrawal -- Any Other Reason

IRA TYPE		10% PENALTY	INCOME TAX DUE
	Tax-Deductible IRA	Yes, with exceptions.*	Yes
	Nondeductible IRA	On earnings, with exceptions.*	On earnings, not original contributions.
	Roth -- Less than five years old.	On earnings, with exceptions.*	On earnings, not original contributions.
	Roth -- More than five years old.	On earnings, with exceptions.*	On earnings, not original contributions.
	*Exceptions include: (a) if your medical expenses exceed 7.5% of your AGI; (b) if you annuitize your withdrawals; (c) if you collect federal unemployment benefits for 12 consecutive weeks and use IRA withdrawals to pay for health insurance.

SEP* and SIMPLE** IRAs For The Self-Employed or Small Business Owners

		SEP IRA	SIMPLE IRA
	Eligibility	1. Anyone who is self-employed. 2. Any employed person with freelance income. 3. Any business owner.	1. Employers with 100 employees or less who do not maintain any other retirement plan. 2. Any self-employed person who does not maintain another retirement plan.
	Annual Contributions	For self-employed: 20% of self-employment income up to $40,000. For employees: 15% of salary up to $40,000.	$8,000 in employee contributions ($9,000 if employee will be age 50 or older at year-end). Employer must match up to 3% of compensation. (In certain situations, the match can be 1% to 2%.) The alternative choice is an automatic 2% match for all employees. All employee and employer contributions are immediately vested.
	Withdrawals after age 59 1/2.	Taxes due on earnings and contributions.	Taxes due on earnings and contributions.
	Withdrawals before age 59 1/2.	10% early withdrawal penalty plus taxes.	If funds are held for less than two years, there's a 25% early withdrawal penalty plus taxes. After two years, there's a 10% withdrawal penalty plus taxes.
	* Simplified Employee Pension Plan. **Savings Incentive Match Plan for Employees.

The Coverdell Education Savings Account
(Formerly Known as an Education IRA)

ELIGIBILITY
	Single person with AGI below $110,000 (subject to phase-out rules). Married people filing jointly with AGI below $220,000 (subject to phase-out rules). Married people filing separately with AGI below $110,000 (subject to phase-out rules). No earned-income requirement for contributors.
ANNUAL CONTRIBUTIONS
	Maximum annual contribution is $2,000 on behalf of any child under age 18. The maximum contribution amount is phased out for singles with AGIs between $95,000 and $110,000; for married couples filing jointly with AGI between $190,000 and $220,000; and for married persons filing separately with AGIs between $95,000 and $110,000. Contributions are not tax-deductible. The contribution for 2002 must be made by April 15, 2003.
WITHDRAWALS
	Tax-free, provided they are used for qualified higher-education expenses (including room and board). Otherwise, income tax and a 10% penalty on earnings will generally apply. The account's funds must be used or the account liquidated by the time the beneficiary (the intended college student) reaches age 30. However, the account can be transferred tax-free to benefit another family member if the original beneficiary doesn't use the funds for college.

Tax-Free 60-Day Withdrawals

IRA funds can be withdrawn tax-free and penalty-free for 60 days, provided the full amount is returned to the account within this time period. The money can be returned to the same account or to a new IRA. In effect, this is like being able to take a short-term, interest-free loan from your IRA. However, you can do this just once in any 12-month period. If you don't replace the money within 60 days, you will owe income tax on the withdrawal and generally a 10% penalty if you are under age 59 1/2.

What's AGI?

Your adjusted gross income is the number at the bottom on page 1 of your 1040. Specifically, it's your gross income minus so-called above-the-line deductions. These are deductible IRA contributions (as well as deductible SEP, SIMPLE and Keogh contributions), the student-loan-interest deduction, deductible contributions to medical savings accounts, moving-expense deduction, half of the self-employment tax paid by self-employed individuals, the deduction for health-insurance premiums paid by self-employed persons, the new deduction for higher education expenses, penalties on the early withdrawal of savings and deductible alimony payments. AGI does not include the standard deduction or itemized deductions. However, the key figure for purposes of calculating eligibility for deductible and Roth IRA contributions is actually "modified" adjusted gross income, or MAGI. This is your AGI (as explained) with the following adjustments: (1) add back deductible IRA contributions, (2) add back the student-loan-interest deduction, (3) add back the new deduction for higher education costs, (4) add back Series EE U.S. Savings Bond interest excluded from taxation because it's used to pay higher-education expenses, (5) add back certain employer adoption-assistance payments excluded from taxation and (6) add back certain foreign earned-income and foreign-housing-cost reimbursements excluded from taxation. For simplicity's sake, we have used AGI throughout this article when we really mean MAGI. However, for most people, the MAGI number will simply equal AGI before taking into account deductible IRA contributions. A fair number of people will then have to consider the add-backs for items 2, 3 and 4 above. Only a few will be affected by the add-backs for items 5 and 6 above.

What's Earned Income?

	This is income that you have actually worked for -- like salary or self-employment income. It does not include investment income such as interest, dividends or profits from sales. It also does not include earnings from pensions or annuities.