IRAs

Traditional IRA Accounts

Who can contribute?
Anyone under the age of 70-1/2 with income from compensation (or with a spouse who earns compensation if filing jointly).  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. 

How much can I contribute?
Total combined contributions to Roth and Traditional IRAs are capped at $5,500/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 have not reached age 70-1/2 at the end of the year and you earn compensation (or your spouse earns compensation and you file a joint return). 

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Earnings compound without tax until withdrawn and contributions may be tax deductible.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, or for payment to beneficiaries at owner’s death.

 

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 traditonal IRA or QRP** can convert money from these plans into a Roth IRA, regardless of income and tax filing status. Taxable income resulting from the conversion may be deferred in 2010 and split evenly over 2011 and 2012.

How much can I contribute?
Total combined contributions to Roth and Traditional IRAs are capped at $5,500/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 70-1/2.

When can I withdraw without restrictions?
Withdrawals can be made without restrictions upon the age of 59-1/2, disability, death 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?
A single filer who has a MAGI* up to $95,000, or a joint filer who has a MAGI* up to $190,000.
Some people with higher MAGI may be able to make smaller contributions.  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.

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 Marge Schmuhl marge@countycitycreditunion.com or Beth Krahn beth@countycitycreditunion.com, or call (920) 674-5542.