Individual Retirement Accounts (IRA)

A Traditional IRA is your opportunity to make tax-deferred and possibly tax-deductible contributions to your retirement savings account. Individuals who have earned income and their spouse (if married filing jointly) can contribute to a Traditional IRA until age 70.5.

Benefits and Features

  • Minimum $50 deposit
  • You may qualify for a saver’s tax credit of up to $1,000 when you make a contribution.
  • Any earnings generated within the IRA are tax-deferred (you do not pay tax on the earnings until you withdraw them.)

Contributions

  • $6,000 per year maximum for taxpayers under 50 years of age
  • $7,000 per year maximum investment for taxpayers over 50 years of age
  • Once taxpayer reached age 70.5, 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 taxpayer reaches age 70.5, 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  • Funds removed before full retirement eligibility incur a 10% penalty of the amount withdrawn and are also taxed at the standard income tax rate at time of withdrawal.

Unlike a Traditional IRA, a Roth IRA account offers you 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 and Features

  • Minimum $50 deposit
  • You may qualify for a saver’s tax credit of up to $1,000 when you make a contribution.
  • Because all Roth IRA contributions must be included in your taxable income, and therefore are not tax-deductible, you can withdraw your contributions tax- and penalty-free. .

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

  • If the amount originally contributed is withdrawn, the distribution is not considered taxable and is not subject to penalty regardless of the time it has been in the account or the age of the member.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.

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