Active participant rules for spouses:
An individual is not considered an active participant in an employer-sponsored plan just because the individual's spouse is treated as an active participant. However, if the individual's spouse is treated as an active participant, the maximum amount of the individual's deduction for his/her own IRA contribution will be phased out at Adjusted Gross Incomes between $150,000 and $160,000 as computed on the joint income tax return.

Adjusted Gross Income:
This is the calculation point between total gross income subject to reporting to the IRS and taxable income, which is the net income after all deductions and exemptions are subtracted. The importance of your Adjusted Gross Income (AGI) is that it is increasingly the starting point for figuring all deductions that are based on or limited by a percentage of your income. Your AGI may be found on line 33 of Form 1040.

Eligibility:
Any individual, whether or not he or she is or is not covered by an employer-sponsored pension plan, including government pension plans, may establish his or her own individual retirement account (IRA). The amount of the maximum annual contribution to this plan is limited to the lesser of either 100 percent of the individual's earned taxable compensation income, or $2,000. What portion of this contribution may be deductible varies, depending on whether the individual (and/or his or her spouse if married), is an active participant in an employer-sponsored pension plan, and on the amount of the individual's Adjusted Gross Income (combined with his or her spouse's, if married).

Guide to Professional Designations and Licenses:
Here are some of the most widely-known financial credentials being advertised by financial advisors today (IRA.com does not endorse any particular designation, and offers this for informational purposes only).

CFA: Chartered Financial Analyst.
Awarded by the Association for Investment Management Research, this technical designation is designed for investment professionals, to support the skills required for portfolio management and investment analysis. Candidates for the charter must pass three levels of examination (one exam may be taken per year). Preparation is via self-study of a body of knowledge published by AIMR, and includes financial statement analysis, securities regulations, ethics, capital markets, asset allocation, and application of theoretical concepts. Candidates must accrue three years of related experience and establish AIMR membership prior to award of the charter. AIMR does not mandate continuing professional education for maintenance of the CFA charter.

CFP: Certified Financial Planner®.
Awarded by the Certified Financial Planner Board of Standards, this designation is characterized by the CFP Board as a license. Candidates must pass a comprehensive 10-hour examination testing the candidate's knowledge of financial planning, investments, estate planning, tax and retirement planning, and ethics. Preparation for the examination is via five or more educational courses under a curriculum approved by the CFP Board, and offered at more than 100 institutions throughout the United States. Candidates must have three years financial planning experience plus an undergraduate degree to qualify for the award of the license (five years without a degree). CFP licensees are required to renew their license every two years through the completion of 60 hours of continuing education.

ChFC: Chartered Financial Consultant.
Awarded by The American College, this designation is based on the completion of eight distance-learning courses offered by the College. Candidates qualify sequentially through separate post-course examinations. Courses, five of which are approved by the CFP Board as preparation for the CFP license, include financial planning, investments, estate planning, tax and retirement planning. Candidates must have two years related business experience plus an undergraduate degree to qualify for award of the ChFC (three years without a degree). Designees who matriculated after June 30, 1989 must renew their designation every two years with the completion of 30 hours of continuing education (designees who began their ChFC studies prior to the 1989 deadline may not be required to prove their attendance at continuing education programs).

CLU: Chartered Life Underwriter.
Awarded by The American College, this designation is based on the completion of eight distance-learning courses offered by the College. Candidates qualify sequentially through separate post-course examinations. Course work emphasizes use and application of life insurance and may encompass life, disability and long-term care insurance, employee group benefits, pensions, and financial, estate, and retirement planning. Candidates must have two years related business experience plus an undergraduate degree to qualify for award of the CLU (three years without a degree). Designees who matriculated after June 30, 1989 must renew their designation every two years with the completion of 30 hours of continuing education (designees who began their CLU studies prior to the 1989 deadline may not be required to prove their attendance at continuing education programs).

CPA: Certified Public Accountant.
Awarded by the 54 U.S. state and territorial boards of accountancy upon the successful completion of four separately scored examinations covering auditing, business law, accounting and reporting on business enterprises, and accounting practices for taxation, managerial, government and nonprofit organizations. CPAs must meet individual state standards for continuing professional education every two years.

CPA/PFS: Personal Financial Specialist.
Awarded by the American Institute of Certified Public Accountants (AICPA) to members who hold a valid CPA license, have passed an examination, and have completed 750 hours of financial planning practice within the previous three years. Renewal requires annual maintenance of the CPA and membership in AICPA, completion of 72 hours of continuing professional education every three years and 750 hours of practice in financial planning every three years. Practice may include personal financial planning process, personal income tax planning, risk management planning, investment planning, and retirement planning.

Ineligible investment assets:
IRA funds can be invested in almost all types of investments other than life insurance and certain "collectibles". The prohibited "collectibles" include art, rugs, antiques, gems, stamps, etc. Specific U.S. Government and State issued gold, silver, and platinum coins and bullion are not considered to be "collectibles". In many instances a taxpayer must establish a self-directed investment account with their IRA custodian in order to invest in non-publicly traded investments.

IRA's (overview):
There are currently three types of IRAs that are not established by employers. These are: education IRAs, traditional IRAs, and Roth IRAs. In addition, employers may establish SIMPLE or SEP IRAs for themselves and their employees. All of these plans, except for the education IRAs are primarily focused on retirement savings. The education IRAs are more appropriately utilized as a way to partially provide for higher education costs.

Contributions to IRAs are generally limited to earned compensation with no more than $2,000 attributable to any single tax year. Deductions to traditional IRAs may range from totally deductible, to partly deductible, to totally nondeductible.

Earned compensation includes wages, salaries, and fees received for personal services, including net self-employment income. Married couples filing joint income tax returns may contribute up to $2,000 each, if the combined compensation of both spouses is at least equal to the contributed amount.

Distributions from traditional IRAs must commence no later than the April 1 following the date the taxpayer reaches age 70 1/2. Minimum amounts must then be withdrawn from the IRA plan to avoid a penalty of 50 % of the minimum amount that should have been withdrawn.

Guidelines for employer-sponsored IRAs, the SIMPLE and SEP IRAs, differ greatly from the IRAs established directly by individuals for their own benefit.

Stepped-up Basis:
Stepped-up basis is the value of property or investments at the date of death. For example, a stock cost $5,000 and grows to $75,000; if you sell it you have a $70,000 capital gain. If you die while still holding stock, your heir's cost basis is $75,000, so when they sell it they would have to pay tax on anything over $75,000, or get a loss on anything less than $75,000.

Taxable Earned Compensation:
Taxable earned compensation includes wages, salaries, and fees received for personal services, including net self-employment income. Earned compensation does not include Social Security benefits, retirement or pension distributions, capital gains income, interest or dividends.

Trustee-to-Trustee Transfers:
A trustee-to-trustee transfer occurs when your current plan custodian sends the money or assets directly to another rollover plan, most commonly to an IRA. You should have a skilled professional assist you with the kind of transaction, to avoid unintentional taxation and or penalties.

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