Do you want your savings to be in a protected, no-risk, environment with a good rate of return in dividends? An Individual Retirement Account is for you. But what kind should you pick???
Traditional IRAs
An account that lets you defer taxes on the earnings of your contributions until they are withdrawn. Also certain contributions may be tax deductible in the tax year for which they are made.
If you are younger than 70½ for the entire tax year and have earned income (or your spouse has earned income), you are eligible to establish a Traditional IRA
Deductibility of Traditional IRA contributions is based on whether you are an active participant in an employer-sponsored retirement plan, your tax status, and your modified adjusted gross income (MAGI). All earnings on your Traditional IRA remain tax deferred until you make withdrawals from the account and then taxed as income in the year they are withdrawn.
Roth IRAs
The Roth allows only nondeductible contributions and features tax-free withdrawals for certain distribution reasons after a five-year holding period. Roth IRA contributions are nondeductible and taxed in the year they are earned. If you expect to be in a higher tax bracket when you retire, you may benefit from a Roth IRA rather than from a traditional IRA.
There are two requirements for eligibility to contribute to a Roth IRA: 1) you must have earned income (or your spouse must have earned income) and 2) your modified gross income (MAGI) cannot exceed certain prescribed limits.
Money contributed to a Roth IRA is taxable as income in the year it is earned. There will be no taxes due on the earnings from a Roth IRA when it is distributed after meeting the five-year holding requirement period and distributions are taken for the following reasons; 1) after age 59 ½, 2) permanent disability, 3) a first-time home purchase, or 4) in the event of your death. Roth IRA distributions of contribution amounts are always free of penalty tax, regardless of the reason or timing. That’s what makes the Roth a popular choice in savings products.
Education Savings Account
CUA is proud to offer the Coverdell Education Savings Account (CESA) for educational needs. To open and contribute to a CESA, the child must be a member of CUA, and be under age 18. There are no age restrictions for children with special needs. These accounts offer tax-free withdrawals if used for education expenses.*
Traditional & Roth Contribution Limits
In 2005 the standard limit for IRA contributions is $4,000 with an additional catch up (for persons over age 50) amount of $500 for a total contribution limit of $4,500. Over the next few years, the standard limit will be raised to $5,000 with a catch up amount of $1,000 bringing your total contribution limit to $6,000 by 2008. Beginning in 2009 and thereafter, the standard limit will raise to $5,000 + the COLA (cost of living adjustments) with a catch up amount of $1,000 for a total of $6,000 + COLA. See a CUA Representative for a complete disclosure of IRA limits/requirements.
IRA Certificates
CUA provides 12, 24, 36, 48 and 60 month IRA certificates where dividends are paid quarterly. Occasionally we have a special offering. Check our certificate rate comparison frequently for those offerings. We also have Flexible IRAs that dividends can be paid monthly for Traditional, Roth and Education IRAs.
*see a tax professional for all tax-related questions.
