Avoid Last-Minute IRA Mistakes This Tax Season; List of 12 Common Contributor Mistakes; Bulletin # 4 in a series through April 16.

Business Editors

BOSTON--(BUSINESS WIRE)--March 15, 2001

With the April 16, 2001 deadline for opening and contributing to your 2000 Individual Retirement Account (IRA) fast approaching, here is the Fidelity Investments(R) list of common mistakes IRA contributors make to help you take the guesswork out of IRA investing.

Mistake 1: Assuming that an annual contribution made between January 1 and April 15 is automatically credited to the prior tax year, not the current tax year. Unless a contribution is specifically designated for the prior tax year, IRS regulations require financial firms to process the contribution for the current year. If contributing via check for the prior year, investors should clearly label as a prior year contribution (e.g., year 2000) in the memo section of the check. If contributing online, Fidelity.com, for example, requires that you designate your contribution as either "prior year" or "current year."

Mistake 2: Investing too cautiously in your IRA when you're years from retirement. According to a recent study, half (52%) of retired Fidelity customers said they wished they had invested more aggressively for retirement.(1) IRAs are considered long-term, tax-advantaged accounts and should therefore be looked at as part of your overall retirement strategy. It is important to have a well-diversified retirement portfolio and know what you are buying, the environment in which transactions take place, and the level of associated risk involved.

Mistake 3: Thinking an IRA is like a CD. Unlike a certificate of deposit, an IRA allows you to choose among a variety of investment vehicles, including mutual funds and individual securities. Take time to periodically revisit your asset allocation to make sure it coincides with your long-term investment goals.

Mistake 4: Not designating a beneficiary. It's important that you identify who you want to inherit your IRA, and reevaluate your beneficiary choices at significant life-stage events, including marriage or divorce, the birth of a child, or the death of a beneficiary.

Mistake 5: Believing that you can't contribute to an IRA if you contribute to a 401(k). An IRA is a tax-advantaged retirement account that allows a person with compensation to invest up to $2,000 each year (aggregated amongst all Traditional and Roth IRAs) whether they're contributing to an employer-sponsored plan, such as a 401(k), or not. Depending on your income and tax filing status, participation in an employer-sponsored plan determines whether your IRA contribution is tax-deductible.

Mistake 6: Not understanding the benefits of a Roth IRA. At Fidelity, the Roth IRA, which was introduced in 1998, has surpassed the Traditional IRA in popularity.(2) Take the time to determine which IRA is right for you. Fidelity's online IRA Evaluator(SM) at Fidelity.com/ira can help compare and contrast the benefits of a Roth versus a Traditional IRA for specific situations and help you decide whether you should convert from a Traditional IRA to a Roth IRA.

Mistake 7: Not converting to a Roth IRA because of the tax hit. Except for non-deductible contributions made to your original IRA, the amount of the conversion is considered income and is taxable in the year you convert. Although a conversion requires you to include the taxable assets you're converting in income (potentially increasing your taxes for the year you convert), a conversion enables you to avoid future federal taxes on any subsequent IRA earnings and withdrawals (provided certain requirements are met). To avoid a large one-year tax hit, consider converting smaller amounts over several years to a Roth IRA.

Mistake 8: Waiting until the last minute to contribute. You can make your 2001 IRA contribution now, instead of waiting until April of next year. Don't miss out on giving yourself an additional year of tax-advantaged compounding.

Mistake 9: Writing a check versus contributing online. Beginning this year, if you are eligible, you can open and immediately fund your IRA online at Fidelity.com/ira. Now you can make things easier for yourself by avoiding the paperwork. Plus, contributing online means you can get your contribution invested in stocks or mutual funds faster.

Mistake 10: Not double-checking to see if you qualify to deduct your IRA contribution from your taxes. Contributions to Traditional IRAs, unlike contributions to Roth IRAs, are tax-deductible in some cases. You are eligible for full deductibility of your $2,000 contribution for 2000 if you are an active participant in an employer-sponsored retirement plan (such as a 401(k)), are receiving compensation, and your 2000 AGI (Adjusted Gross Income) is $52,000 or less (joint filers) or $32,000 or less (single filers). You can take a partial deduction for up to $62,000 AGI (joint filers) and $42,000 AGI (single filers).

Mistake 11: Saving for retirement in a taxable account when you're self-employed. A SEP-IRA (Simplified Employee Pension Plan) may be established by a self-employed person or by an employer for himself/herself and his/her employees. Contributions are made by the employer to IRAs established for the benefit of the employees. A SEP is generally easier to establish and administer than a qualified plan.

Mistake 12: Having multiple IRAs. Managing multiple IRAs - and 401(k)s - can make it more difficult to know the composition of your underlying investments, and multiple statements can add to the confusion. Consider consolidating those accounts so that you have a clearer picture of your underlying investments and are able to manage them more easily. Consolidating may help reduce fees as well.

Editor's Note: Watch for tax and IRA season news and tips from Fidelity Tax Time Bulletins through April 16.

About Fidelity

Fidelity Investments is one of the world's largest providers of financial services with custodied assets of $1.5 trillion, including managed assets of $944.4 billion. Fidelity offers investment management, retirement, brokerage and shareholder services to 16 million individuals and institutions as well as through 5,500 financial intermediaries. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, one of the largest mutual fund supermarkets and a leading online brokerage firm. Fidelity Investments' website is at www.Fidelity.com.

For more complete information, including charges and expenses on any fund available through Fidelity, call or write for a free prospectus. Read it carefully before you invest or send money.

Fidelity Distributors Corporation, 82 Devonshire Street, Boston, MA 02109

Fidelity Investments Institutional Services Company, Inc., 82 Devonshire Street, Boston, MA

129984/4d

(1) The Fidelity Investments-sponsored study was conducted from November 10 - December 27, 2000 by the independent research organization Yankelovich Partners to conduct the benchmark wave of a tracking study of Fidelity clients to understand their attitudes and behaviors with regard to retirement. The results are based on a survey of 1,391 Fidelity clients between the ages of 55 and 68, who have $100,000 in assets with Fidelity, and who have at least an equal say in financial decision making in the household. Assuming no sample bias, the maximum margin of error is +/-4 percent (at the 90 percent confidence level).

(2) In January and February 2001, 56 percent of new contributory IRAs opened at Fidelity Investments were Roth IRAs versus 44 percent Traditional IRAs.