Traditional IRAs

Lost or Stolen Debit Card?
Call 800-535-8440

Funds Availability

FDIC Insurance Notice

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
they are active participants during 2012, earning no more than $92,000 if married and filing jointly, or $58,000 if filing single.

For those who are participants in an employer sponsored retirement plan, Traditional IRA deductibility is gradually phased out above these 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.

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 redeposited 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.