investing ira by smashingpumpkins


									IRA Investing:

Top 3 Reasons to Consider an IRA
December 31, 2007 Growing your retirement nest egg is hard work, but a tax-advantaged Investment Retirement Account (“IRA”) provides three advantages that may help you to meet the challenge. 1. Tax Deferred Growth 2. Tax Deductibility 3. Investment Opportunities

What is a Roth IRA?
Unlike its traditional counterpart, a Roth IRA does not feature tax-deferred growth or possible tax deductibility. The money you invest is “after-tax” dollars, but qualified withdrawals can be taken absolutely tax-free. This means that you do not have to pay taxes on any of the money invested or interest earned when you take a qualified distribution. This may be a major advantage in post-retirement, as your tax bracket could likely be equal or lower to your current bracket.


Tax-Deferred Growth
In a regular investment account, when you make money Uncle Sam gets to share a portion of your investment gains in the form of current taxes. Retirement accounts, however, are structured differently. An IRA is designed to provide certain tax advantages that help you to save toward retirement. • In a traditional IRA, taxes are deferred until money is withdrawn from the account, which provides your money the opportunity to enjoy the power of compounding. This means that your money will grow faster than it would in a fully taxable account. Contributions to a traditional IRA are made pre-tax, and federal and state taxes are not assessed each year on interest earned. The Power of Tax-Deferred Growth: Hypothetical Growth of $5,000
Consider a one-time $5,000 hypothetical investment that grows at 8% annually. An investor in the 28.75% tax bracket would accumulate twice as much in a traditional IRA than in his or her standard investment account over 30 years.
$60,000 50,000 40,000 30,000 20,000 10,000 0 $26,377

Hypothetical $5,000 IRA Investment Hypothetical $5,000 Investment for an Investor in the 28.75% Tax Bracket

Year 0

Year 10

Year 20

Year 30

Investment returns are not guaranteed and will fluctuate over time. Your return could be lower or higher than the 8% assumed in this example. The illustration assumes taxes are paid from the non-qualified account; returns shown would have been higher if taxes had been paid out-of-pocket. Investing involves risk, including possible loss of principal, especially over short periods of time.


Tax Deductibility
In addition to tax-deferrals, the money that you put into an IRA can possibly be deducted from your taxable income. So, besides helping you to invest for your future, you may pay less in taxes each year. • You may be able to deduct all or part of your IRA contribution. If neither you or your spouse participate in an employer-sponsored retirement plan, you are eligible for full deductions. If either of you do participate, your eligibility will depend upon your level of earned income. • For example, a couple who pays 28.75% of their income in federal taxes could save $2,300 by contributing $4,000 each to a fully deductible IRA.


IRA Investing:

Top 3 Reasons to Consider an IRA

How Much Can I Contribute?
For the 2007 tax year, you can contribute up to $4,000 in a traditional or Roth IRA, or a maximum of $5,000 if you’re age 50 or older. In 2008, contribution levels rise to $5,000, while the catch-up provision for 50 or older remains at $5,000. (The limit will depend upon the level of earned personal income. Please seek the guidance of a tax professional for tax information and advice.)


Investment Opportunities

Compared to most employer-sponsored retirement plans, an IRA gives you the power to select how your money is invested. You know your situation best, and can consider which options best fit your time horizon, risk tolerance and retirement planning objectives. Let AFBA 5Star Funds help you reach your retirement goals. Establish a traditional or Roth IRA today and access the wide variety of investment options and high quality, experienced portfolio management teams that AFBA 5Star Funds has to offer.

AFBA Family Of Funds
• • • • • • • AFBA 5Star Large Cap Fund AFBA 5Star USA Global Fund AFBA 5Star Mid Cap Value Fund AFBA 5Star Small Cap Fund AFBA 5Star Science & Technology Fund AFBA 5Star Balanced Fund AFBA 5Star Total Return Bond Fund

Did You Know?
You are eligible for an IRA even if you contribute in an employer-sponsored retirement plan. IRAs can supplement your employer-sponsored retirement investment and provide an additional way for you to invest toward retirement. Contribution limits will depend upon which types of products you select and your level of earned income.

Investing for retirement is one of the primary reasons people invest. Let us help you get started today. Contact AFBA at 800-243-9865 to learn more about AFBA Funds and IRA options available.

You should consider the investment objectives, risks, charges and expenses of the AFBA 5Star Funds carefully before investing. A prospectus with this and other information may be obtained by calling 1-800-243-3428 or by visiting our website at The prospectus should be read carefully before investing. PFPC Distributors, Inc. King of Prussia, PA 800-243-9865

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