IRA ACCOUNTS

Whether you are looking for an IRA account or certificate, we can provide you with an IRA solution. An IRA certificate follows the same guidelines as the Traditional or Roth IRA and requires a $500 minimum opening balance.

Traditional IRA
Contributions to the Traditional IRA may be tax deductible (consult with your tax advisor). Taxes will be applied to the interest earned during the life of the IRA, but only when drawing money out of the account. In other words, you can use "pre-tax" dollars to make contributions to this account.

When a member retires and withdrawals this money, they may pay a lower tax on this income than when employed and earning a higher salary. If it becomes necessary to withdraw money from this account before age 59 ½, a penalty may be charged. Periodic payments must begin from the Traditional IRA at the age of 70 ½.

Roth IRA
A Roth requires payment of income tax on the contributions made - meaning your contributions are in "after-tax" dollars. Qualifying withdrawals are tax-free. Owners of this type of IRA must hold this account for a period of five years and meet one of the several criteria to make penalty-free, tax-free withdrawals of both contributions and earnings.

Coverdell Education Savings Account
(ESA - previously known as the Educational IRA)
This account can be opened for children under the age of 18 to help plan for college. Contributions are nondeductible, but earnings are tax-free upon withdrawal if used for educational expenses before the child's 30th birthday.

How to open an IRA and what are the contribution requirements?

Traditional or Roth:
There is no minimum age to open this account. However, this individual must have earned: compensation wages, salaries, tips, professional fees, bonuses and commission, net profit from self-employment or taxable alimony. It cannot be: rental income, interest, dividends, unemployment compensation, welfare, child support, pensions (including Social Security), nor annuities.

Non-working spouses may open an IRA and contribute a portion of the working spouses income as long as they file a joint tax refund. Each spouse may contribute up to $3,000 per year. If contributing to a Roth IRA, there are limitations based on earned income and filing status.

Maximum contributions to an IRA in a given year are $3,000 or 100% of earned compensation. In the case of a spousal IRA contribution, each spouse may contribute $3,000 annually. To do so a couple must have a total compensation of at lest $6,000 and file a joint tax return.

ESA: This account is to be opened for children under 18 years of age with the child's Social Security Number and a designated beneficiary, grantor or depositor, and a listed responsible individual.

When can a contribution be made?

Traditional or Roth: Contributions can be made at any time during the calendar year. It does not need to be the full $3,000. Numerous contributions can be made as long as the maximum is not exceeded. In addition, one can continue to make contributions up until that years tax deadline (I.E. 2002 contributions can be made until April 15, 2003).

ESA: Contributions may come from many sources with the only requirement being that they do not exceed $2,000 per child, per year. Note: For this type of IRA, a person does not need earned income to contribute.

Rollover -vs.- Direct Transfer: Traditional and Roth
Rollover - Money goes to the owner of the IRA in the form of a check or a deposit to their account. The owner has 60 days to reinvest the funds into another IRA or they may be liable for income tax and a 10% early distribution tax. The rollover is limited to one rollover for each IRA every 365 days.

Direct Transfer - Money goes straight from one financial institution to another at the owners' request. This is done in the form of a check made payable to the other financial institution or by an electronic transfer. An owner may make unlimited direct transfers in a given year and they go unreported to the IRS.

Distribution
Traditional and Roth: If an owner wants to withdrawal money before the age 59 ½, a 10% penalty is paid along with the taxes owed on the withdrawn amount. Some exceptions do apply to these penalties.

ESA: Contributions may be withdrawn without incurring an income tax or early distribution penalties. Earnings used for qualified educational expenses may be withdrawn for the Designated Beneficiary under the age of 30 without incurring income tax or early distribution tax. If the Designated Beneficiary withdrawals money for other expenses unrelated to education, the earnings portion of the distribution is taxable and there's also a 10% tax or penalty.

For questions or more details regarding our IRA program, please contact us.