Questions Answered for IRAs
Individual Retirement Accounts
An Individual Retirement Account at First Service Federal Credit Union is a solid way of assuring your retirement security from the day you begin depositing. The following is not intended to be tax information, but to provide you information on the service we can offer. For detailed tax information, please consult your tax advisor.
We offer a variety of Individual Retirement Account (IRA) programs.
All are fully insured by the NCUA to $250,000 per account separate
from your other credit union accounts, and have no annual fees
or maintenance charges. Click on “Rates” in the left sidebar
for current rates on Share Accounts or choose Certificate rates
to maximize your retirement dollars.
Traditional IRA
You can choose a Share Account for your Traditional IRA that
requires a low $50 minimum opening balance. This account is
a quarterly share account that yields dividend earnings that
are tax-deferred until withdrawn. It's a terrific way to save
for retirement through convenient periodic deposits. As your
account balance grows, you may want to switch your Traditional
IRA to a term-certificate to maximize your earnings.
- Annual contributions to a Traditional IRA are currently
$5,000. Investors age 50 and over can make additional "catch-up"
contributions.
- Your contribution is tax deductible to income limit restrictions.
Taxes on both contribution and earnings are paid at the
time of withdrawal.
- Distribution is generally mandatory at age 70 ½
.
- Withdrawals may be subject to a 10% penalty if made prior
to age 59 ½ .
Roth IRA
Any individual or spouse who is employed, with no age restriction,
can contribute up to $5,000 per year from earned income in
after-tax dollars in a Roth IRA. While the contribution is
not tax-deductible, all earnings are tax-free when withdrawn
according to government guidelines.
- The funds must remain in the account for a minimum of
five years.
- Funds may be withdrawn for any purpose, starting at age
59 ½ , without paying any taxes whatsoever.
- Account may be retained after age 70 ½ .
- Earnings on contributions may be subject to a 10% penalty
if withdrawals are made prior to age 59 ½ .
- Investors age 50 and over can make additional "catch-up"
contributions.
- A Roth IRA can be invested as a Share IRA or Certificate
IRA.
Education Savings Account(s)
Save up to $2000 a year, per child in special education accounts.
Earnings will accumulate tax-free and, if used for qualified
education expenses, withdrawals will also be tax-free.
- Recipient must be under 18 years of age.
- All funds must be distributed by age 30.
Earnings on contributions may be subject to a 10% penalty
if withdrawals are used for other than education purposes.
*Ask your tax advisor for guidance on “qualified education
expenses”.
IRA Certificates
In addition to Share Account IRAs, IRA Certificates offer
members the opportunity to deposit their IRA monies into a
Certificate Account. IRA Certificates are available with terms
from 6 to 60 months. You select the term that is right for
you. The longer the term, the higher the dividend rate for
added tax-deferred earnings. IRA Certificates offer the following:
- Higher rates of return are available in an IRA Certificate
Account than in an IRA Share Account.
- Flexible terms from 6 months to 60 months.
- Minimum balances range from $500 to $1,000.
- No annual fees are charged for administering the account.
MOST FREQUENTLY ASKED QUESTIONS
Q.)
How long do I have to make IRA contributions for the current tax year?
A.)
You can make deposits to a Traditional or Roth IRA for the previous tax year until the April tax-filing deadline, which is usually April 15.
Q.)
What's the difference in a Transfer IRA and a Rollover IRA?
A.)
With a Transfer , the funds are sent directly from your IRA at one institution to your IRA at another. You do not personally take possession of the funds. Transfers are not reported to the IRS since funds are going directly from one IRA to another.
With a Rollover , the funds are given to you to deposit to an IRA. Rollover transactions are reported to the IRS, and you have 60 days to deposit the funds in an IRA and avoid an IRS penalty. You may roll over an IRA one time in 12 months. Rollovers are used for moving eligible funds from a qualified retirement plan (QRP) to a traditional IRA. If you plan to roll over funds from a qualified retirement program to an IRA, be sure you carefully review the tax consequences.
Q.)
What penalties apply for early withdrawals from an IRA?
A.)
IRS penalty: If you're under 59 ½ ,
the IRS will charge a 10% early withdrawal penalty
from a Roth or Traditional IRA. For a Traditional
account, you will also need to include the withdrawal
amount as income when you file your taxes. If you
choose to close your IRA Certificate before its maturity
date, the credit union will charge an early withdrawal
penalty.
Q.)
How can I make additional deposits to my IRA?
A.)
It's easy to make deposits by payroll deduction or automatic transfers from your credit union checking or savings account. Any deposits you make through automated means are considered contributions for the tax year in which we receive them. You can also make deposits by mail and at branch locations.
Q.)
Can I borrow against an IRA?
A.)
The tax laws governing IRAs do not permit that, but ask us about other loan options that could help you.
To compare IRA Features, check
out this Quick Comparison Chart.
Program |
Description |
Who Can Contribute?
1
|
2009 Contribution
Limits 2
|
|
Traditional
IRA
|
A tax-deferred retirement savings program, with possible tax deductions. |
Individuals younger than 70½ years with earned income. |
Individual - $5,000
$1,000 catch-up contribution for those 50 years and older |
Roth IRA |
A non-deductible retirement account featuring tax-free withdrawals on your earnings after five years and when you reach 59 ½ years or a qualifying event. |
Individuals, any age, with annual, earned income.
Married couples filing a joint tax return can only make a partial contribution if their income is between $166,000 and $176,000. Singles can only make a partial contribution if their income is between $105,000 and $120,000. |
Individual - $5,000
$1,000 catch-up contribution for those 50 years and older |
Coverdell Education IRA |
A tax-deferred investment account created for paying education expenses on behalf of a beneficiary (up to the age of 18). |
Anyone can contribute. Individuals must earn less than $95,000 if filing single, and joint taxpayers must earn less than $190,000 to make a contribution.
The phase out range for married couples filing a joint return is $190,000-$220,000 (partial contribution only). The phase out range for singles is $95,000-$110,000 (partial contribution only). |
$2,000 per year per beneficiary |
|
|
|
1) For Roth and Coverdell
Education IRAs a contribution phase-out
period applies to contributors whose income
falls within the phase-out range.
2) Or 100% of earned income, whichever
is less. Other restrictions apply.
|
|
|
