Individual Retirement Account (IRA) Options

Traditional IRA

With a minimum $50 opening deposit, a Traditional IRA is your opportunity to make tax-deferred, and possibly tax-deductible, contributions to your retirement savings.

Individuals who have earned income and their spouses, if married filing jointly, can contribute to a Traditional IRA up until the year they turn 70.5. The IRS provides guidelines about claiming a tax deduction for your Traditional IRA contributions.

Benefits:
  • Direct, pre-tax income for tax-deferred investments.
  • The IRS assesses no capital or income gains from an IRA until a withdrawal is made.
Contributions:
  • $5,500/per year maximum investment for taxpayers under 50 years of age.
  • $6,500/per year maximum investment for taxpayers over 50 years of age.
  • Once a taxpayer reaches the age of 70.5 years, they are no longer eligible to make contributions.
  • Contributions are tax-deductible.
Distributions:
  • Funds are treated as ordinary income and are subject to income tax.
  • Distribution can happen for members who are as young as 59.5 years of age.
  • Once a taxpayer is 70.5 years, they must take the required minimum distribution from their IRA.
  • Funds removed before full retirement eligibility incur a 10% penalty of the amount withdrawn and are also taxed at the standard income tax rate at time of withdrawal.

Roth IRA

With a minimum $50 initial deposit, you can open a Roth IRA. Unlike a Traditional IRA, these accounts offer the opportunity to create tax-free income during retirement. With a Roth IRA, you can contribute at any age if you (or your spouse if filing jointly) have taxable compensation and your modified adjusted gross income is below certain amounts as governed by the Internal Revenue Service (IRS).

Benefits:
  • Direct pretax income for tax-deferred investments.
  • The IRS assesses no capital or income gains from an IRA until a withdrawal is made.
Contributions:
  • The maximum contributions allowed for a Roth IRA depends on your Modified Adjusted Gross Income, and is defined by the IRS . Consult your tax advisor for details.
  • Once a taxpayer reaches the age of 70.5 years, they are no longer eligible to make contributions.
  • Contributions are tax-deductible.
Distributions:
  • Roth IRA withdrawals will be made on a FIFO (first in, first out) basis. Any withdrawals will be taken from contributions first. Therefore, no earnings are considered withdrawn until all original contributions are withdrawn.
  • If the amount originally contributed is withdrawn, the distribution is not considered taxable and is not subject to penalty regardless of the time it has been in the account or the age of the member.
  • Dividend distributions are subject to standard income tax rates.
  • Dividend distribution can happen for members who are as young as 59.5 years of age.
  • Dividend distributions before full retirement eligibility will incur a 10% penalty on the amount withdrawn.
  • There is no required minimum distribution.

For further IRA information, please stop by our office during our office hours or contact us.

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