Anyone with

earned income who is under age 70 is eligible to open an IRA.

Taxpayers may

make contributions until April 15, 2002, and qualified individuals contributing

to traditional IRAs may claim a deduction on their 2001 returns.

But the tax

treatment of your IRA contribution depends on you and your spouse's eligibility

to participate in an employer-sponsored plan, filing status and adjusted

gross income.

A partial IRA

deduction will be available in 2001 to joint filers with AGIs under $63,000

and to single filers with AGIs under $43,000 who are active participants

in an employer-sponsored retirement plan.

If only one

spouse is a participant, the IRA deduction phase-out begins at $150,000

of AGI.

Earnings in

a traditional IRA are not taxed until you take distributions or until

you are required to start making withdrawals at age 70.

Contributions

to a Roth IRA are not tax-deductible, but all withdrawals of principal

and interest are tax-free if you hold your account for at least five years

and until you reach age 59.

Among its other

features, the Roth IRA has higher income limits than traditional IRAs.

The Roth IRA contribution phases out at $150,000-$160,000 of AGI for joint

filers and $95,000-$110,000 for singles and heads of household.

With a Roth

IRA, you also can continue to contribute after you are 70 and can withdraw

your money at any age.

The contribution

limits are the same for both traditional and Roth IRAs.

Under the Tax

Act of 2001, the maximum contribution to an IRA, which has been set at

$2,000 for the last 20 years, rises gradually from $3,000 in 2002 to $5,000

in 2008.

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