A Traditional Individual Retirement Annuity is a personal retirement plan. Like all such plans, a Traditional IRA is designed to help you accumulate money for retirement. It can help you save for retirement in several ways. For example:

• If you qualify, you can deduct your Traditional IRA contributions for federal income tax purposes.
• Interest earnings on a Traditional IRA are tax-deferred until you take them out.

Can I Deduct My Traditional IRA Contribution From My Taxes?

• Generally, if you are not an active participant in an employer sponsored retirement plan, you can deduct your Traditional IRA contribution for federal income tax purposes. The amount of the deduction is the lesser of 100 percent of your earned income, or $2000.
• If you or your spouse are an active participant in a qualified retirement plan (or were at any time during the year) and your adjusted gross income (AGI) falls within certain limits, you may be eligible for a total or partial IRA deduction.

Can My Working Spouse Contribute to a Traditional IRA?

If you are married and neither of you participate in a qualified retirement plan, then both of you can deduct the lesser of 100 percent of your earned income, or $2,000. Keep in mind that the maximum annual contribution for both spouses is $4,000, and no more than $2,000 can be
deposited into either spouse's-Traditional IRA.

If just one of you participates in a qualified plan, then both of you are subject to a phase-out schedule. The non-covered spouse can deduct a Traditional IRA contribution if your combined AGI is less than $150,000. If your combined AGI is greater than $160,000, then a deductible
Traditional IRA contribution is not allowed for the non-covered spouse. For incomes between $150,000 and $160,000, the deductible amount is reduced by $200 for every $1,000 of income in excess of $150,000. For example, if you are covered by a qualified plan, your spouse is not, and your combined adjusted gross income is $62,000, you are not eligible for a deduction because your combined AGI exceeds $60,000 (1998 phase-out limit). However, because your combined AGI is less than $150,000, your spouse can deduct $2,000 as a Traditional IRA contribution. If you are married filing a separate return, no deduction is allowed.

If both of you are covered by a plan, then both of you are subject to the phase-out schedule. The deductible amount is reduced by $200 for every $1,000 if income is in excess of $50,000. For example, if your combined AGI is $56,000, then each of you can deduct an $800 Traditional IRA contribution, unless you file separate returns.

Can My Non-Working Spouse Contribute to a Traditional, Spousal IRA?

Your non-working spouse can only deduct an amount equal to the amount you can deduct. In other words, if you are only eligible for a $1,500 deduction, due to your combined AGI, then your spouse's deduction is also limited to $1,500. Futhermore, the maximum annual contribution for both spouses is the lesser of 100% of your income or $4,000, and no more than $2,000 can be
deposited into either spouse's Traditional IRA.

Is the Interest Rate Competitive?

Yes. ERIE Family Life has consistently credited a very competitive interest rate to annuity contracts. ERIE Family Life's financial condition is extremely strong and allows the company to maintain its competitive standing.

Are There Any Charges or Fees?

ERIE Family Life's annuities do not have premium charges, "loads" or annual fees. The only charge associated with an ERIE Family Life annuity is a graded surrender charge.

When Can I Take Money Out of My Traditional IRA?

Withdrawals and retirement benefits can be taken out at any time. A 10% penalty tax applies to premature distributions taken before age 59½.

Certain exceptions can avoid the 10% penalty tax. For example, regardless of age, if the distribution is made as substantially equal periodic payments over the life expectancy of the IRA owner, or the joint lives of the owner and a designated beneficiary, the 10% penalty tax can be avoided. However, the penalty tax may be imposed if the distribution schedule is modified within five years, or the attainment of age 59½, if earlier.

Futhermore, beginning in 1997, distributions made to pay for medical expenses in excess of 7.5% of adjusted gross income will not be subject to the penalty tax. In certain situations, premature distributions by unemployed individuals used to pay health insurance premiums can also avoid the penalty tax.

Starting in 1998, premature distributions used to pay education expenses for the IRA owner, their spouse, child, or grandchild will not incur the penalty tax. And finally, first time home buyers can withdraw up to $10,000 prior to age 59½ and not have to pay the 10% penalty tax.

Keep in mind that ordinary income tax will be payable on all distributions, regardless when taken. In addition, you must begin taking at least the required minimum annual distribution from your Traditional IRA by April 1 of the year following the year in which you reach age 70½.

When Do I Pay Taxes on My Traditional IRA?

Traditional IRA benefit payments are reportable as ordinary income in the year they are received.

What Settlement Options Do I Have at Retirement?

ERIE Family Life offers a variety of settlement options. With careful planning you can design a benefit schedule to meet any need or situation. Some of the more popular options include:

• A Life Annuity-Pays an income for as long as you live.
• A Period Certain Annuity-Pays an income for a specified number of years.
• Payments of a Fixed Amount-Pays a fixed amount until the account value is exhausted.
• Interest Only-Pays the interest earnings on a periodic basis, thereby preserving the account value.
• A Joint and Survivor Annuity-Pays an income for as long as either you or the joint annuitant is alive.

In the event of death during the benefit payment period, any remaining guaranteed payments are paid according to the original benefit schedule to the designated beneficiary.

What Makes an Erie Family Life Traditional IRA So Attractive?

• Flexibility of Minimum Payments-You can establish a Traditional Individual Retirement Annuity with a one-time premium payment, or a Flexible Premium Retirement Annuity designed to accept periodic contributions.
• Flexibility of Settlement Options-You can select from a variety of settlement options that can be tailored to your situation. You can even select an income option that provides you an income you cannot outlive.
• Optional Waiver of Premium Benefit-This benefit provides for the continuation of premium payments should you become permanently disabled as provided for in the contract.
• No "Front-End" Loads or Expense Charges-The only charge applicable to an ERIE Family Life Annuity is a graded surrender charge imposed on partial or complete surrender made within the first five years of the contract.
• Proceeds Not Subject to Probate-Proceeds paid to a named person as a result of the annuitant's death are not subject to probate.

The Taxpayer Relief Act of 1997 created a new type of individual retirement annuity called the Roth IRA. Available beginning with tax year 1998, a Roth IRA is designed to help you accumulate money for retirement.

If you qualify, you can deposit up to $2,000 annually into a Roth IRA.

Interest earnings on a Roth IRA accumulate and may be received federal income tax free when
withdrawn if certain requirements are met.

Your retirement years can be the greatest of your life. Prepare now by saving with a Roth Individual Retirement Annuity from Erie Family Life. It's a great idea!

Am I Eligible For a Roth IRA?

If you have earned income, you are eligible for a Roth IRA even if you are currently covered by a qualified retirement plan, as long as your income is below certain limits.

If your tax filing status is single and your adjusted gross income (AGI) is less than $95,000, you can contribute up to $2,000 annually. Your eligible contribution phases out for AGIs of $95,000 to
$110,000 on a pro-rata basis.

If you are married, file a joint return, and your AGI is less than $150,000, you may contribute up to $2,000 annually. Your eligibility phases out if your AGI is between $150,000 and $160,000.
Your spouse is also eligible for a Roth IRA subject to the same income limits provided you file a joint federal income tax return.

In addition, you can continue to contribute to a Roth IRA as long as you have earned Income, subject to the limits shown above.

How Much May I Deposit Into My Roth IRA?

You may contribute the lesser of 100% of your earned income or $2,000. However, if you also contribute to a Traditional IRA, your total contributions to both IRAs cannot exceed $2,000 for each tax year.

Can I Deduct My Roth IRA Contribution From My Taxes?

Yes. If your AGI is less than $100,000 and your federal tax filing status is single or married filing
jointly, you can convert a Traditional IRA to a Roth IRA. A taxpayer may choose to convert* a portion or all of their existing Traditional IRAs to a Roth IRA.

* Because there are numerous factors to consider, please seek the assistance of a qualified tax advisor before making the decision to convert.

Can I Deduct My Roth IRA Contribution From My Taxes?

Under no circumstances are contributions to a Roth IRA deductible for tax purposes. The tax-favored treatment of distributions from a Roth IRA is the feature that makes it an attractive investment for enhancing retirement income.

When Can I Start Taking Money Out of My Roth IRA?

"Qualified Distributions" are not subject to federal income tax or the 10% premature distribution penalty. A qualified distribution is any distribution made more than five tax years after the first year of the Roth IRA contribution and after the taxpayer reaches age 59½; because of the annuitant's death or total disability; or for a qualified first time home buyer (up to $10,000).

All other distributions are considered "non-qualified" and are treated first as coming from the taxpayer's after-tax investment, and not subject to tax or penalty. Earnings are included in the taxpayer's gross income in the year received. Earnings received prior to age 59½ may also be subject to a 10% premature distribution penalty. Exceptions to the 10% penalty include death, disability, substantially equal periodic payments, qualifying medical and higher education expenses, health insurance premiums for someone on unemployment, and qualified first time home buyer
expenses.

When Do I Have to Start Taking Money Out of My Roth IRA?

You are never required to take distributions from a Roth IRA. As a result, you can allow your account to continue building on a tax-free basis for future use.

What Makes a Roth IRA From ERIE Family Life So Attractive?

• Flexibility of Premium Payments -You can establish a Roth IRA with a single premium payment, or a Flexible Premium Retirement Annuity designed to accept periodic contributions.
• Flexibility of Settlement Options-You can choose from a variety of settlement options that can be tailored to your situation. You can even select an option that provides you an income you cannot outlive.
• Optional Waiver of Premium Benefit-This benefit provides for the continuation of annuity premium payments by Erie Family Life should you become permanently disabled as provided for in the contract.
• No "Front-End" Loads or Expense Charges-The only charge applicable to an Erie Family Life Annuity is a graded surrender charge imposed on partial or complete surrender made within the first five years of the contract.
• Proceeds Not Subject to Probate-Proceeds paid to a named person as a result of the annuitant's death are not subject to probate.

Is an Annuity Right for You?

• Will your pension fall short of providing you with enough retirement income!
• Are you concerned about the future of Social Security!
• Is the idea of tax-deferred earnings attractive to you!
• Do you have money that you want to save for the future!

If you answered yes to any of these questions, an annuity from Erie Family Life may be just right for you. It offers:

• A competitive return on your money
• Safety of principle and interest
• Tax-deferred earnings
• A periodic income you cannot outlive

What is an Annuity?

With an annuity you simply set aside a sum of your money in order to generate a periodic income.
There are two phases to an annuity. The accumulation phase is when premium payments accumulate interest earnings. The payout phase is when a sum of money is paid out over a desired benefit period.

Both the accumulation phase and the payout phase of an annuity are extremely flexible. For example, the accumulation phase may consist of a single premium payment or a series of periodic premium payments. Also, the accumulation period may be as short as thirty days, or as long as fifty years or more. The payout period may be for a period as short as five years, or for the entire lifetime of the annuitant.

Whatever your situation calls for, an annuity from ERIE Family Life can be tailored to meet your needs.

What Are the Tax Advantages?

The interest earned on an annuity is tax-deferred. In other words, you do not pay income tax on the earnings until you begin the payout phase.

The following chart shows how your money would grow if invested in a tax-deferred annuity compared to a certificate of deposit, both earning 6 percent. The example is based on an annual deposit of $2,000 for 30 years, and an assumed income tax bracket of 28%

As you can see, the tax-deferred annuity generates substantially more money than the taxable certificate of deposit. If you surrender the annuity and pay tax on the entire gain, the after-tax value of the annuity is still greater than the certificate of deposit.

During the payout phase, either all or a portion of each benefit payment will be taxable. For example, if you select an interest only option, the entire periodic payment is considered interest income and therefore is fully taxable. If you select a lifetime income option for your non-qualified annuity, only a part of each payment is reportable as taxable income.

Certain benefit payments may be subject to a 10 percent federal tax penalty if the policy owner is less than 59½ years old when payments are made. Check with your tax advisor to review your specific situation.

Is the Interest Rate Competitive?

Yes. Erie Family Life has consistently credited a very competitive interest rate to annuity contracts.
Erie Family Life's financial condition is extremely strong and allows the company to maintain its
competitive standing. The initial interest rate credited to each premium is guaranteed for one year. After that the credited rate can change to reflect current market conditions. However, under no circumstances may the rate credited fall below 4.5 percent during policy years one through five, 4 percent during policy years six through ten, and 3.5 percent thereafter.

Are There Any Charges or Fees?

Erie Family Life's annuities do not have premium "loads" or annual fees. Such charges only reduce the performance of annuity contracts. The only charge associated with an Erie Family Life annuity is a graded surrender charge, only imposed on partial or complete surrender. Surrender charges are completely waived in the event of death, and are not imposed in calculating settlement options. The surrender charge is a percent of the account value and reduces each year according to the following schedule:

Policy year:

1 - 8%
2 - 5%
3 - 3%
4 - 2%
5 - 1%

What Settlement Options Are Available?

Erie Family Life offers a variety of settlement options. With careful planning you can design a benefit schedule to meet any need or situation. Some of the more popular options include:

• A Life Annuity-Pays an income for as long as you live.
• A Period Certain Annuity-Pays an income for a specified number of years including a lifetime Income.
• Payments of a Fixed Amount-Pays a fixed amount until the account value is exhausted.
• Interest Only-Pays the interest earnings on a periodic basis, thereby preserving the account value.
• A Joint and Survivor Annuity-Pays an income for as long as either you or the joint annuitant is alive.

In the event of death during the benefit payment period, any remaining guaranteed payments are paid according to the original benefit schedule to the designated beneficiary.