Traditional IRA Accounts
Who can contribute?
Anyone with income from compensation (or with a spouse who earns compensation if filing jointly). Additionally, anyone receiving an eligible rollover distribution from a traditional qualified retirement plan (QRP) who wants to continue to defer income taxes by moving the money to a traditional IRA may do so. Starting with the 2020 tax year, there is no age limitation for contributing to a Traditional IRA.
How much can I contribute?
For the 2022 tax year, the total contributions to Roth and Traditional IRAs are capped at $6,000 per year, and for the 2023 tax year it is capped at $6,500 per year, or 100% of compensation, whichever is less. An additional $1,000 catch-up contribution is allowed if age 50 or older.
Who can make deductible contributions?
Your contributions are deductible if you earn compensation (or your spouse earns compensation and you file a joint return). Starting with the 2020 tax year, there is no age limitation for making tax deductible contributions to a Traditional IRA
What are the tax advantages?
Earnings compound without tax until withdrawn and contributions may be tax deductible.
When can I withdraw without restrictions?
Withdrawals can be made without restrictions upon age 59-1/2, or for qualified educational expenses, qualified medical expenses, disability, first time home purchase (up to $10,000), health insurance premiums while unemployed for 12 weeks or longer, covering the cost of childbirth or adoption expenses (up to $5,000), or for payment to beneficiaries at owner’s death. Required Minimum Distribution withdrawals must be taken annually starting at age 72 to avoid penalty.
Roth IRA Accounts
Who can contribute?
You are eligible if your MAGI* is within the limits set by Congress and you earn compensation (or your spouse earns compensation and you file a joint return). If your MAGI is too high to contribute the annual maximum, you may be able to make a smaller contribution. Starting in 2010, anyone with a traditional IRA or QRP** can convert money from these plans into a Roth IRA, regardless of income and tax filing status.
How much can I contribute?
For 2022, the total contributions to Roth and Traditional IRAs are capped at $6,000 per year, and for the 2023 tax year it is capped at $6,500 per year, or 100% of compensation, whichever is less. An additional $1,000 catch-up contribution is allowed if age 50 or older.
What are the tax advantages?
Earnings are tax-deferred and withdrawals are tax-free if the account is open for five tax years and withdrawals are for a qualified reason (see below). You are not required to start withdrawals at age 72.
When can I withdraw without restrictions?
Withdrawals can be made without restrictions upon the age of 59-1/2, disability, death, covering the cost of childbirth or adoption expenses (up to $5,000), or a first-time home purchase (up to $10,000). Regular contributions can be withdrawn tax-free and penalty-free at any time. Earnings are tax-free if account is open for five tax years and withdrawn for qualified reason.
Coverdell Education IRA Account
Who can contribute?
For the 2022 tax year, a single filer who has a MAGI* up to $110,000, or a joint filer who has a MAGI* up to $220,000 may contribute. The amount which may be contributed phases out for single filers with MAGI between $95,000 and $110,000; and for joint filers with MAGI between $190,000 and $220,000. Contributions are not allowed after the beneficiary reaches the age of 18 with the exception of a special-needs designated beneficiary.
How much can I contribute?
You can contribute up to $2000 per child per year, subject to MAGI restrictions.
Who can make deductible contributions?
No one can deduct contributions.
What are the tax advantages?
Withdrawals for certain qualified education expenses are tax-free. Qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education. Special needs beneficiaries can withdraw funds tax free to pay for qualified education expenses at any age. A beneficiary may receive tax-free distributions from an Education IRA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits.
When can I withdraw without restrictions?
Withdrawals are tax- and penalty-free only for qualified education expenses (earnings are subject to tax and penalty for most other withdrawals). Funds can be transferred from one child’s account to an account for another child in the family.
* MAGI – Modified Adjusted Gross Income. Contribution and deductibility limits change frequently. Consult your tax professional regarding your individual circumstances.
** QRP – Qualified Retirement Plan such as a 401(k), 403(b), or a 457 governmental plan.
Click Here for Rate Information
Questions? Contact us at mycu@countycitycreditunion.com or call (920) 674-5542.