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Traditional IRA & Roth IRA Information

What is an IRA?

  • An IRA is an Individual Retirement Account for you to save funds to supplement your income at retirement.
  • There are two types of Individual Retirement Accounts to choose from, a Traditional IRA and a Roth IRA.
  • The maximum annual contribution amounts are up to $5000 if you are younger than 50; $6000 if you are 50 or older; or 100% of your earned income, whichever is less (this does not include investment earnings such as interest and dividends)
  • Central One Federal Credit Union IRA accounts have no monthly or annual administrative or custodial fees.

What is the difference between a Traditional IRA and a Roth IRA?

  • Depending on your income, your contribution to a Traditional IRA may be tax deductible, and you do not pay taxes on the earnings until you withdraw them. This is an advantage if you are in a lower income bracket when you retire.
  • Roth IRA contributions are not tax deductible, but the earnings on qualified withdrawals are tax free.
  • There are no age limitations to a Roth Contribution. To contribute to a Traditional IRA you must be younger than 70 ½.
  • Roth Contribution eligibility is determined by your MAGI (Modified Adjusted Gross Income) which is your income before certain deductions. The maximum annual contribution limit for a Roth is up to $5000 if you are younger than 50; $6000 is you are 50 or older or 100% of your earned income, whichever is less (this does not include investment earnings such as interest and dividends).
  • Traditional IRA contributions are up to $5000 if you are younger than 50; $6000 if you are 50 or older; or 100% of your earned income, whichever is less (this does not include investment earnings such as interest and dividends)
  • Roth IRA's do not require you to take distributions in your lifetime. A Traditional IRA has a required mandatory distribution (RMD) beginning at age 70 ½.

Can I invest my 401K or Pension into an IRA?

  • It is very easy for us to transfer your qualified retirement funds into a Central One Federal Credit Union Traditional IRA. There are two options for you to choose from:
    1. A Direct Rollover - the plan administrator makes the check payable to Central One Federal CU for your benefit.
    2. A Rollover - the plan administrator will make a check payable to you and you then have 60 days to deposit the funds into an IRA.
  • You will need to contact the plan administrator requesting the required forms for this distribution. Once the plan administrator receives these forms back from you they will then disburse the plan according to your instructions.
  • Central One has many different IRA certificate investment terms with very competitive rates for you to choose from. Whatever options you choose you simply contact a Central One representative who will assist you in completing our IRA Plan documents.

How do I make contributions to an IRA?

  • If you are contributing $1000 or more at one time Central One has certificates from 6 months up to 5 years at very competitive rates.
  • If you choose to make contributions from payroll funds that you have directly deposited with Central One, we can set up an IRA savings account for your payroll contributions and then once you have accumulated $1000 those funds can then be transferred to an IRA certificate.

Can I withdraw from my IRA?

  • If you are 59 ½ or older you can withdraw from your IRA without federal early withdrawal penalties.
  • Events that would be considered a "qualified distribution" and not subject to a federal penalty for early withdrawal would be:
    1. Reaching 59 ½
    2. Disability
    3. Health insurance premiums or medical expenses that exceed 7.5 percent of your adjusted gross income
    4. Qualified higher-education expenses for you, your spouse, your children or your grandchildren
    5. Purchase of a first home
    6. Death of the account holder

What if I die before I withdraw all of my funds?

  • At the opening of an IRA account you can establish beneficiaries. You have the option of choosing both primary and secondary beneficiaries. Primary beneficiaries will inherit the IRA upon your death; secondary beneficiaries inherit the IRA upon the death of both the IRA owner as well as the primary beneficiary.
  • Beneficiaries on your IRA can be changed at any time you so designate.
  • Depending on your age at death and the beneficiary's relationship to you, the beneficiary may be able to:
    1. Take life expectancy payments
    2. Spread the distribution over five years
    3. Treat the IRA as his/her own if the beneficiary is the spouse
    4. Rollover the amounts to his /her own IRA if the beneficiary is a spouse
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