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A traditional IRA is a type of retirement plan that has been in existence since 1975. Traditional
IRAs offer tax-deferred earnings, and the possibility for tax-deductible contributions. You may
contribute to a traditional IRA if you earn compensation and you will not reach age 70 ½ by the
end of the year. All earnings in the traditional IRA are not taxed until they are withdrawn. The
ability to defer taxes on the earnings, and to withdraw in a year when you may be in a lower tax
bracket, may mean more after-tax dollars for your retirement.
If you are entitled to receive an eligible rollover distribution from an employer’s plan, you can
continue deferring taxes by moving the money into a traditional IRA. The best way to do this is
to inform the plan administrator that you want the funds moved directly to your traditional IRA
in a direct rollover.
All IRA accounts are fully insured by the NCUA up to $250,000 and are insured separately from
any other non-retirement accounts you may have with us.
A Roth IRA is an individual retirement account to which participants are able to make annual
non-deductible contributions. Unlike traditional IRAs in which your money is tax deferred, the
money in a ROTH IRA, including earnings, can be withdrawn tax-free. Contributions are allowed
after 70 ½ as long as you continue to earn compensation. Minimum distributions are not
required at age 70 ½ and your money may grow tax-free for as long as you like.
There are two requirements to qualify for tax-free withdrawals of the income in your ROTH IRA
has earned. First, your ROTH IRA must meet the “five-year test.” In other words, it must be
five years after the first year for which ROTH contributions were made. Second, one of the
following conditions must apply:
- You are over age 59 ½
- Funds are going to your beneficiary upon your death
- You have become disabled
- You are using the funds for a first-time home purchase (lifetime limit is $10,000)
All IRA accounts are fully insured by the NCUA up to $250,000 and are insured separately from
any other non-retirement accounts you may have with us. |
