Your IRA Investment: It's Your Choice!
Whatever your retirement goals and needs:
- You're looking for a Traditional, Roth or Educational IRA
- You have funds from a previous employer's retirement plan that you want to roll into an IRA
- Or, you have funds from several IRA's that you want to consolidate.
Take advantage of tax-deferred earnings and possibly yearly deductions.
Who's it for:
- You are a taxpayer under the age of 70 1/2 with earned income, or you are a non-working spouse.
- Deductible contributions are more important to you than tax-exempt distributions.
- You would like to supplement your retirement savings in addition to your employer's retirement plan.
- You do not have another IRA or you want to split contributions between a Traditional IRA and a Roth IRA.
Your contribution to a Traditional IRA is fully tax deductible, up to the contribution limit, if:
- You and your spouse do not participate in your employer- sponsored retirement plan at work.
- You do participate in an employer-sponsored retirement plan and your modified adjusted gross income is under $64,000 as a single taxpayer or $103,000 as married filing jointly.
- You are not covered by an employer's retirement plan, but your spouse is, and your joint modified adjusted gross income is no more than $193,000.00
You don't pay taxes on earnings or pre-tax dollars in your IRA until you begin receiving distributions. The required beginning date to receive distributions is no later than April 1 following the year in which you reach age 70 1/2.
Withdrawals and Penalties for IRAs
- Withdrawals with federal additional tax. If you make withdrawals before age 59 1/2, these withdrawals may be subject to a 10% federal additional tax and possible state taxes. Bank penalties may apply for withdrawals from time deposits before maturity.
- Withdrawals without federal additional tax. Under certain conditions, withdrawals may not be subject to the 10% federal additional tax (for example, if you take substantially equal periodic distributions for an extended period, or you or a family member is buying a first home or going to college). However, the withdrawals are subject to ordinary income taxes. Bank penalties may apply for withdrawals from time deposits before maturity.
Rollover from an employer-sponsored retirement plan
A Traditional IRA is a good choice for individuals who are changing jobs or retiring and want to keep their retirement plan distribution invested and untouched by taxes. By making a direct rollover from your employer-sponsored plan, you avoid withholding taxes and penalties on the distribution, so more of your money keeps compounding tax-deferred.
SEP (Simplified Employee Pension) IRAs
A SEP is one of the most effective ways for business owners (and their employees) to build their retirement savings. It's a good choice for small businesses, self-employed individuals, and salaried individuals that operate a business on the side.
Contributions to a SEP for yourself and your employees are tax-deductible as a business expense. SEP earnings grow tax-deferred until withdrawals begin. With taxes deferred, your balance may grow faster, potentially giving you more than you'd have by investing the same amounts in a taxable investment account.
SEPs allow employers to contribute up to 25% of each participant's annual compensation or $56,000 whichever is less. The percent you contribute must be the same for all participating employees.