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Individual Retirement Accounts - Minimum opening deposit of $250.00, competitive rates and a variety of terms to help you in planning your retirement. IRS Publication 590

Traditional IRAs

Roth IRAs

Understanding IRA Distributions

Rates

Calculate your savings

Traditional IRAs

The Retirement Plan for Everyone

Today more than ever before, one of the greatest challenges facing American workers is ensuring their financial security in retirement.

With uncertainty over the adequacy of Social Security to meet the needs of future retirees, Americans forced to rely more heavily on their own resources to support their retirement lifestyle.

At the same time, the world of employer based pensions is also changing. Each year, there are fewer and fewer employer-sponsored defined benefit plans--the kind of plan that assures employees that they will receive a dependable income throughout their retirement years. Today, employees must make an affirmative decision to put money aside for their retirement. And even when an employer retirement plan is available, employees may be required to make most or all of the contributions.

IRA FAQs

How can I begin to save for retirement?

Individual retirement arrangements (IRAs) are one of the most viable tools to ensure a secure retirement.

Traditional IRAs offer

Independence (they can be opened and funded without any employer participation)
Immediate tax benefits, with contributions and earnings tax- deferred until retirement
Accessibility, with assets always available (something not generally true of employer plans) and
Flexibility, because IRA owners choose their contribution amount (within limits), investments, and the financial organization.

What are the basic contribution restrictions?

The requirements for contributing to a Traditional IRA are few.

You can contribute if

you are under age 70 ½
you or your spouse has earned income from employment

You can contribute each year up to

a maximum of $5,500.00 for 2013 and
a catch up contribution of $1,000.00 if you are age 50 or older.

If eligible, your spouse may be able to contribute the amounts listed above to his or her traditional IRA as well.

Are all traditional IRA contributions tax-deductible?

One of the immediate benefits of contributing to a Traditional IRA is the potential income tax deduction. Traditional IRA contributors receive a deduction if:

they are not active participants under an employer’s retirement plan, or
if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income is: within certain limits, see IRS Pub 590.

For those who are participants in an employer sponsored retirement plan, Traditional IRA deductibility is gradually phased out above certain income levels. Contributions can still be made on a nondeductible basis.

Should I Contribute if I can’t take a deduction?

Yes! There are significant benefits to making Traditional IRA contributions, even if they are not tax-deductible.

A nondeductible contribution

has already been taxed and will not be taxed again,
grows tax-deferred, because earnings are sheltered from taxation until withdrawn, and
is still one step closer to a secure retirement.

Am I eligible to take a tax credit for my IRA contributions?

If you fall within certain income limits, you may be eligible for an income tax credit of up to 50 percent of your retirement savings contributions that do not exceed $2,000. An eligible individual is someone who is

at least 18 years of age as of the close of the taxable year,
not eligible to be claimed a dependent of another taxpayer, and
not a full-time student.

Please see a competent tax advisor to determine if you qualify for this credit.

Can Traditional IRA assets be moved?

Traditional IRA holders can take comfort in the fact that their Traditional IRA assets are always available to them, and can be moved to certain IRA’s or retirement plans.

Traditional IRA assets may be

withdrawn and redeposit elsewhere (called a “rollover”),
moved to another organization through a trustee-to-trustee transfer, or
moved to a qualified retirement plan, 403(b) tax-sheltered annuity plan, or governmental 457(b) eligible deferred compensation plan. (Note, however, that your nondeductible assets may not be moved to retirement plans)

Can other assets be combined in a Traditional IRA?

Contributions made by an employer under a simplified employee pension (SEP) plan are actually contributed to a Traditional IRA, and can be combined with other Traditional IRA contributions. Assets from a qualified retirement plan, 403(b) plan, governmental 457(b) plan, or savings incentive match plan for employees of small employers (SIMPLE) plan can also be moved to a Traditional IRA.

When can I use my Traditional IRA assets?

Unlike ,most employer-sponsored retirement plans (in which access is limited to events such as a change of employment, plan termination, reaching retirement age, death, or disability), access to Traditional IRA assets is always guaranteed. If withdrawn before reaching age 59 ½, however, a 10 percent early distribution penalty applies unless you qualify for one of the following exemptions.

Disability
Qualifying medical expenses
Qualifying education expenses
Health insurance expenses if receiving unemployment compensation (under certain conditions)
Qualifying first-time homebuyer expenses
Death
Receipt of substantially equal periodic payments
IRS tax levy
Qualified military reservist distributions

Am I ever required to distribute assets from my Traditional IRA?

Traditional IRA holders who turn age 70 ½ must begin to take annual distributions from their Traditional IRAs. These distributions are generally based on the Traditional IRA account balance divided by an applicable distribution period. Because the purpose of Traditional IRAs is to provide for retirement-not to be a tax shelter-IRA holders who fail to take their required distributions are subject to a hefty IRA tax penalty.

Roth IRAs

A Tax-free Source of Retirement Income

Concern regarding the instability of Social Security continues to grow, and Americans are looking for new ways to secure their financial future. The Roth IRA gives you the option to invest after-tax dollars today, let the investment grow tax deferred, and take qualifying withdrawals tax free.

ROTH IRA FAQ’s

Is investing for retirement important?

Many ideals are changing in today’s society.

The trend of changing jobs more frequently makes it difficult for individuals to acquire great reserves in company pension plans.
Many new entrepreneurs cannot offer retirement options to themselves or their employees until the company becomes financially secure.
Social Security is no longer seen as the answer to retirement funding.

Individuals need to take the lead in building their retirement nest egg if they want to live comfortably during retirement.

What makes the Roth IRA unique?

Unlike any other type of IRAs, your Roth IRA can provide you with tax-free income during your retirement. Your money going into the Roth IRA is taxed; your money later withdrawn, which may potentially include significant amounts of earnings, is tax-free if you follow certain requirements.

Two factors make this possible

First, the money you contribute to the Roth IRA has already been taxed. Therefore the principle amount is never subject to taxes or penalties in the future, as long as you stay within the contribution guidelines.
Second, this retirement savings vehicle allows the money you contribute to grow tax-deferred. If you do not withdraw any of the earnings until you have had a Roth IRA for at least five years, and you satisfy one of four qualifying events, those tax-deferred earnings become tax-free.

Who is eligible?

Unlike the Tradition IRA, there is no 70 ½ age limit on making contributions. You must, however, have earned income equal to the amount you contribute, and your modified adjusted gross income (MAGI) must be below a certain amount for 2013:

$112,000 for single taxpayers
$178,000 for married taxpayers filing joint income tax returns

If your MAGI is within the following phase-out ranges, you may make a partial prorated contribution.

$112,000-$127,000 for single taxpayers
$178,000-$188,000 for married taxpayers filing joint returns
$0-$10,000 for married taxpayers filing separate returns

The phase-out ranges for 2009 - are $105,000-$120,000, $166,000-$176,000, and $0-$10,000, respectively.

If your MAGI exceeds these limits, you are not eligible to make Roth IRA contributions. You might, however, consider a Traditional IRA, which generally does not have income restrictions and also offer certain tax advantages.

If I am eligible, how much can I contribute?

The maximum amount per year is $5,500 for 2013. In addition, if you reach age 50 or older be the close of the taxable year, you may also make a catch-up contribution up to $1,000. As discussed previously, however, there are income thresholds that may reduce the amount you can contribute.

Even though I cannot deduct my Roth IRA contributions, is there any income tax credit available?

If you are an eligible individual and fall within certain income limitations, you may be eligible for a tax credit of up to 50 percent of your retirement savings contributions that do not exceed $2,000. An eligible individual is defined as someone who is

at least 18 years of age as of the close of the taxable year,
not eligible to be claimed as a dependent of another taxpayer, and
not a full-time student

Please see a competent tax advisor to determine if you qualify for this credit.

When can I use my Roth IRA assets?

If you satisfy two conditions, you may take tax-free and penalty-free withdrawals from your Roth IRA. First, a Roth IRA must have been open for minimum of five years. Second, the withdrawal must be made after one of the following events occurs:

attaining age 59 ½
incurring a disability,
incurring first-time homebuyer expenses, or
death

Distributions that meet the above requirements are referred to as “qualified” distributions. While you may take distributions from your Roth IRA at any time, distributions that are not qualified are subject to taxes ( and in some cases early distribution penalties) to the extent they might exceed your aggregate contributions to Roth IRAs.

Understanding Distributions

Withdrawing your Retirement Plan Dollars

You’ve worked hard to save money for retirement. You’ve made contributions to your IRA, to an employer-sponsored retirement plan, or perhaps to both. Now the time has come to withdraw some of your retirement assets. It’s time for a distribution.

Understanding when and how distributions can or must be taken, and the options available at such times, is vital if you hope to make tax-wise decisions regarding your retirement plan assets. For specific details about receiving distributions form a particular type of retirement plan, seek the advice from a competent tax professional.

When can I take a distribution?

Taking a distribution is much easier wit IRAs than with most employer-sponsored qualified retirement plans. IRA assets are essentially available on demand. Qualified plans, on the other hand, generally require an event-known as a “triggering event”- to occur before assets can be withdrawn. These events may differ slightly from plan to plan, but generally include

plan termination,
termination of employment,
death,
disability,
attaining normal retirement are, or
attaining age 59½.

Some plans allow distributions while still employed, without requiring a true triggering event. These distributions are known as “in-service withdrawals.”

Are there any age restrictions?

Whether the plan is an IRA or a qualified plan, withdrawing funds before age 59½ generally means paying an IRS penalty of 10 percent of the amount withdrawn, with certain exceptions.

These exceptions include

death,
disability,
a series of substantially equal periodic payments,
distributions taken for certain qualifying medical expenses,
distributions due to IRS levies,
(for IRAs only) amounts used for health insurance by some unemployed persons,
(for QPs only) separation from service after attainment of age 55, and
(for QPs only) payments to alternate payees under a Qualified Domestic Relations Order.
Roth IRAs have additional rules and exceptions. Please refer to the Roth IRA brochure for more details.

Withdrawals after age 59½ are not subject to the IRS penalty.

Am I required to take distributions?

Congress’ purpose in creating IRAs and qualified plans was to help make retirement more secure, not to provide tax shelters that would delay taxation indefinitely. Congress, therefore, established age 70½ as the time when distributions from retirement accounts are generally required to begin.

Required Minimum Distributions must be taken annually, and calculated by dividing a participant’s plan account balance by the applicable life expectancy factor.
Annual distribution amounts must meet or exceed the required minimum amount (more can be taken, but not less).
Participants are subject to an IRS penalty if RMDs are not taken timely.
Roth IRAs do not have mandatory distributions at age 70½.

Qualified retirement plan participants may have the option to delay distributions until retirement, if they remain employed after age 70½ and are less than a five-percent owner.

How is the required minimum distribution calculated?

Generally, the required minimum distribution is calculated bu dividing the participant’s year end balance by the applicable distribution period found in the Uniform Lifetime Table, which is provided by the IRS.

How are distributions taxed?

When withdrawn, contributions, plus the tax-deferred earnings, are generally included in ordinary income and taxed in the year distributed. However, Traditional IRAs and some qualified plans do not allow after-tax contributions. These amounts are not taxed when distributed, but their tax-deferred earnings are.

Are there options to reduce my tax liability?

Special tax options may apply to certain distributions form qualified plans. If the distribution qualifies, income tax liability may be reduced by using

10-year income averaging (for those who qualify), or
capital gains tax treatment

Can distributions be rolled over?

Distributions from Traditional IRAs or qualified plans that exceed amounts needed to satisfy the required minimum distributions rules may be eligible plan such as an IRA, or to an eligible employer-sponsored retirement plan.

Under the portability rules of the Economic Growth and Tax

Relief Reconciliation Act of 2001 (EGTRRA), rollovers from qualified retirement plans can be rolled to another qualified retirement plan, IRA, 403(b) or eligible 457(b) deferred compensation plan. The surviving spouse of the employee that takes an eligible rollover distribution may apply the rules as if he spouse were the employee.

Are there special rules for beneficiaries?

Both IRAs and qualified plans allow the naming of beneficiaries, in the event that the IRA holder or plan participant dies before all assets are paid out.

IRA beneficiaries

Depending on the age of the IRA holder when he or she dies, and his or her relationship to the beneficiary may

take a complete distribution,
take a complete distribution within five years,
take distributions over the beneficiary’s or IRA holder’s life expectancy, or
treat the IRA as his or her own ( an option available only to the spouse).

Qualified Retirement Plan Beneficiaries

Qualified retirement plan beneficiaries in general have slightly

different options than IRA beneficiaries, and distribution options for qualified plan beneficiaries may differ from plan to plan. Qualified retirement plan beneficiaries may

take annually calculated life expectancy payments, much like IRAs,
take distributions in annuity form,
take a complete distribution within five years, or
distribute and roll a distribution to his or her own IRA or qualified retirement plan (for spouse beneficiaries only).