Field of Membership
Traditional IRAs are more attractive than ever because expanded income limits mean more people will be able to make tax-deductible contributions. In addition, penalty-free withdrawals are allowed for qualified higher-education expenses and for a first-home purchase.
Contributions to the Roth IRA or Coverdell ESA aren't tax-deductible, but the accounts offer the opportunity for tax-free earnings.
Your tax adviser can offer more guidance on which type of IRA may be best for your needs. Of course, we are always here to answer your questions and assist you with opening an IRA. Please stop by your nearest TVACU location or call us today for more information on the benefits of a TVACU IRA.
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Traditional IRA - A TVACU Individual Retirement Account (IRA) offers you tax savings today and a secure retirement in the future. An IRA is a special savings plan authorized by the Federal government to help you accumulate funds for your retirement.
Who can contribute? - Anyone under age 70 ½ who has income from compensation (or who is filing jointly with a spouse who earns compensation) may contribute to an IRA.
How much can I contribute? - Each year you may contribute all or part of your compensation. If under age 50, you may contribute up to $3,000 per year for 2002 thru 2004, $4,000 per year for 2005 thru 2007, and $5,000 per year for 2008 thru 2010. If 50 or older, you may contribute up to $3,500 per year for 2002 thru 2004, $4,500 per year for 2005, $5,000 per year for 2006 and 2007, and $6,000 per year for 2008 thru 2010.
Contributions cannot exceed compensation. Your contribution to a traditional IRA reduces the amount you can contribute to a Roth IRA.
Who can make deductible contributions? - Fully-deductible contributions can be made by single individuals not active in employer retirement plans (regardless of income); single individuals active in employer retirement plans with MAGI* of less than $34,000; married couples with neither spouse active in an employer retirement plan (regardless of income); married individuals active in employer retirement plans with joint tax returns showing MAGI* of less than $54,000; married individuals not active in employer retirement plans with spouses who are, as long as MAGI* is $150,000 or less.
Individuals with incomes exceeding the above limits may be able to deduct an amount that is less than the maximum amount that can be contributed. Check with your tax advisor.
But suppose you're among those who cannot claim a tax deduction. Does this mean you should not make a contribution? Not at all! Contributing to your TVACU IRA is still a smart move for these reasons - because you still need to build funds for your retirement and because all the earnings you accumulate in your IRA are tax sheltered until withdrawn.
What are the tax advantages? - Earnings grow tax-deferred until withdrawn and contributions may be tax-deductible.
When can I withdraw without restrictions? - Withdraw penalty-free for any of the following reasons:
• Qualified higher-education expenses
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• First-time home purchase**
• Age 59 ½
• Disability
• Qualifying medical expenses exceeding 7.5% of
adjusted gross income
• Payment to beneficiaries upon the owner's death
• Payment of health insurance premiums while
unemployed for 12 weeks or longer
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Roth IRA - The Roth IRA offers unique and exciting savings opportunities. The flexibility of the Roth IRA makes it appealing to many different age and income groups. Although it’s not a one-size-fits-all solution, the Roth IRA will give many members an easy and safe way to plan for the future.
Who can contribute? - Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI*: up to $95,000 (single filers) or up to $150,000 (joint filers)
How much can I contribute? - Each year you may contribute all or part of your compensation. If under age 50, you may contribute up to $3,000 per year for 2002 thru 2004, $4,000 per year for 2005 thru 2007, and $5,000 per year for 2008 thru 2010. If 50 or older, you may contribute up to $3,500 per year for 2002 thru 2004, $4,500 per year for 2005, $5,000 per year for 2006 and 2007, and $6,000 per year for 2008 thru 2010.
Who can make deductible contributions? - No one can deduct contributions to a Roth IRA.
What are the tax advantages? - Regular contributions can be withdrawn tax- and penalty-free at any time. After the account has been open five tax years, earnings can be withdrawn tax- and penalty -free for any of these reasons: age 59 ½, disability, death, or a first-time home purchase**.
When can I withdraw without restrictions? - Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59 ½, disability, death, or a first-time home purchase**). Withdrawal is not required to start at age 70½.
The annual contribution limit for a Roth IRA is reduced by regular contributions to a traditional IRA for the year.
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Coverdell Education Savings Account (ESA)*** - When your children are young, it's hard to imagine them strolling a college campus or cramming for final exams. But it's never too early to begin saving - especially when your funds could be growing tax-free in a Coverdell ESA. We hope the following information will help you understand the Coverdell ESA and its advantages as a college savings tool. Before you decide whether or not to open a Coverdell ESA for your child, we recommend that you seek the advice of a tax professional.
Who can contribute? - Anyone may contribute who has MAGI* up to $95,000 for single filers or up to $190,000 for joint filers. Some people with higher MAGI* may be able to make smaller contributions. Contributions are not allowed after the beneficiary reaches age 18 (except for special-needs beneficiaries).
How much may I contribute? - $2,000 may be contributed per child. Limit applies to all Coverdell Education Savings Accounts (ESA) for the same child.
Who can make deductible contributions? - No one can deduct contributions to an ESA.
What are the tax advantages? - Withdrawals for certain qualified education expenses are tax-free. Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age. Qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education. A beneficiary may receive tax-free distributions from a Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits.
When can I withdraw without restrictions? - Withdrawals are tax-and penalty-free only for qualified education expenses (earnings are subject to tax and penalty for most other withdrawals). Funds can be transferred from one child's account to an account for another child in the family.
The above is not intended as tax advice.
Please consult a tax professional.
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* MAGI - modified adjusted gross income from the federal tax form
** - Lifetime limit for exemption on first-time home
purchase is $10,000
*** - Formerly known as the Education IRA
There are two ways you can deposit funds into
an IRA account:
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IRS Share Type Account - You don't have to wait to start your IRA savings. You can deposit any amount you like whenever you like to your IRA share account. It can be by payroll deduction, direct deposit, across the counter, or by check through the mail. When you have accumulated the $500 minimum, you may transfer these funds into a certificate. The dividend rates offered to members are 90% of the 12 month IRA certificate and are paid quarterly.
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IRA Certificate - You may purchase an IRA certificate with a minimum of $500. The rate paid on IRA certificates is the same rate as regular certificates. Maturities are from 180 days (6 months) to 1825 days (5 years). There is a penalty for early withdrawal of an IRA certificate.
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