Individual Retirememnt Accounts (IRA)
Looking to save for retirement or other future goals? Individual Retirement Accounts (IRAs) are a great way to save now for your future needs. These accounts may offer tax advantages and allow you to set aside funds for retirement or a child’s college expenses. Your IRA funds are federally insured up to $250,000 by the National Credit Union Administration, so you can rest assured that your funds are safe from variable rates and market fluctuations.
Why IRAs?
Opening an IRA is a key step in planning for retirement. An IRA helps you save and grow your money with tax advantages. Traditional IRAs may offer tax deductions now, while Roth IRAs provide tax-free withdrawals in retirement. Starting an IRA through ServU Credit Union can be an easy and effective way to secure your financial future, giving you peace of mind as you plan for life after work.
Your IRA funds are federally insured up to $250,000 by the National Credit Union Administration, so you can rest assured that your funds are safe from variable rates and market fluctuations.
Traditional IRAs
A traditional IRA may be a good option if you expect to be in a lower tax bracket when you retire, or you need to roll over funds from a traditional employer retirement plan. You pay taxes on your funds later, when you withdraw it during retirement.
- Contributions may be tax-deductible.
- Members may contribute up to $7,000 per year (including any deposits to a Roth IRA).
- Catch up contributions of an additional $1,000 per year may be made by members over age 50.
- No age limit to open an account, as long as you are earning income.
Roth IRAs
A Roth IRA benefit members who expect to be in a higher tax bracket when they retire. You don’t earn tax deductions on your contributions, but your money grows and you may be able to withdraw it tax-free when you retire. With a Roth IRA, there are some circumstances where you may be able to withdraw funds before retirement.
- Contributions are not tax-deductible. Earnings accumulate tax-deferred and the withdrawal of earnings will be tax-free if qualified.
- Members may contribute up to $7,000 per year (including any deposits made to a Traditional IRA)
- Catch-up contributions of an additional $1,000 per year may be made by members over age 50.
- No age limit to open an account, as long as you are earning income.
Coverdell Educational IRAs
Coverdell Education IRAs can be established for a child under 18 to pay higher education expenses. Contributions can be made up to $2000 per year. Earnings accumulate tax-free and withdrawals will be tax-free if used for educational expenses before the child is age 30.
Should I convert to a Roth IRA?
Roth IRA is a great way for clients to create tax-free income from their retirement assets. Yet, keep in mind that when you convert your taxable retirement assets into a Roth IRA you will generally pay ordinary income tax on the taxable amount that is converted. The conversion amount is not subject to the 10% early distribution penalty. Your tax-free potential is maximized if you pay the taxes from your current income or personal savings and not from your IRA. Individuals of all income levels are eligible to convert to a Roth IRA.
Roth IRA Questions
