Enjoy a safer retirement, one step
at a time, with IRAs.
Invest in your future. A CEFCU Individual Retirement Account (IRA) is a great way to start saving for retirement. Anyone who has earned income is eligible to contribute to an IRA. You can open an IRA with just $5 and earn competitive dividends while selecting from flexible terms.
All figures are for the 2015 tax year.
|Traditional IRA||Roth IRA|
|Who Can Open||Anyone younger than 70½ who has earned income||Anyone with earned income below $131,000 (single) or $193,000 (joint), regardless of age|
|Annual Contribution Limit||$5,5002 (less any Roth IRA contributions)||$5,5002 (less any Traditional IRA contributions)|
|Income Limits||No||$116,000/single taxpayer3
|Early Withdrawal of Original Contributions||No||Yes, at any time, tax free, with no federal penalty.4|
|Qualified Distribution Reasons|| Any one of:
|| Account held 5 years AND any one of:
|Required Distributions||Yes: Beginning by April 1 the year after you turn 70½.||No|
|Rollovers and Transfers||Transfers to and from other Traditional IRAs are permitted.
Rollovers from employer plans are permitted.
|You can roll over a Traditional IRA to a Roth IRA ("conversion").5
Transfers to and from other Roth IRAs are permitted.
|Federally Insured||Up to $250,000 by the National Credit Union Administration (NCUA). This is in addition to the federal insurance on your other CEFCU accounts.|
|Terms Available||1, 2, 3, 4, or 5 years|
|Minimum Deposit||$5. If you open a IRA with $500, or your balance reaches that level, you can select a fixed term (listed above) and earn higher rates.|
- The deduction available to active participants in employer-sponsored retirement plans is phased out on a sliding scale for individual taxpayers with modified adjusted gross income between $61,000-$71,000, and for joint filers with modified adjusted gross income between $98,000-$118,000.
- IRA holders who will be age 50 can make an additional catch-up contribution for the tax year in which they attain age 50 and any year thereafter. The maximum contribution a person age 50 or older may make for the 2015 tax year is $6,500.
- The contribution is phased out on a sliding scale for individual taxpayers with modified adjusted gross income between $116,000-$131,000, and joint filers with modified adjusted gross income between $183,000-$193,000.
- May be subject to a CEFCU withdrawal penalty based on the terms of the IRA.
- When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
Consult with your tax advisor for details relating to eligibility, deductibility, and your specific situation.
Frequently Asked Questions
Federal tax law permits qualified individuals to plan for their financial future and enjoy special tax advantages by using an Individual Retirement Account (IRA). While you should always consult your personal tax advisor for rules on rollovers, eligibility, contribution limits, and tax implications of any retirement plan, the following information can help you make an informed decision.
- Who can contribute to an IRA?
- When should I open my IRA?
- How much can I contribute to an IRA?
- Can I convert my existing Traditional IRA into a Roth IRA?
- Will I ever have to stop contributing to my IRA?
- What is the deadline for contributing to an IRA?
- When can I start to withdraw funds from my IRA?
- Will I ever be required to take distributions from my IRA?
- Is my IRA federally insured?
- What is the new rollover interpretation for 2015?
Who can contribute to an IRA?
Generally, if you have earned income and are under age 70½, you may contribute to a Traditional IRA. Wage-earners who meet certain income restrictions may also contribute to a Roth IRA, regardless of their age.
Minors may contribute to a Roth IRA or Traditional IRA for any year in which they have earned income, subject to the same income limitations as adults.
As with any savings plan, the earlier you start your IRA, the more time your money has to grow.
For example, if a 20-year-old invested $2,000 in a IRA at 5.4% APY and continued to invest $2,000 per year at the same rate for the next 45 years (until age 65), then that person would end up with more than $377,000.
On the other hand, if a 45-year-old started to contribute to a IRA with $2,000 at 5.4% APY and continued to make a $2,000 contribution for the next 20 years (until age 65), that person would end up with less than $73,000.
The contribution limits vary depending upon factors such as age, income, and the type of IRA.
If you are a wage-earner under age 70½, you may contribute up to $5,500 per year to a Traditional IRA with no income restrictions. Couples who are married and file a joint tax return may contribute up to $11,000 ($5,500 each).
For a Roth IRA, individual wage-earners may contribute up to a total of $5,500 each year if they are single taxpayers with a modified adjusted gross income under $116,000 or married filing jointly with a modified adjusted gross income under $183,000. Single taxpayers with a modified adjusted gross income of $116,000 to $131,000 or married taxpayers filing jointly with a modified adjusted gross income of $183,000 to $193,000 may make partial contributions to a Roth IRA. There is no upper age limit for making Roth IRA contributions.
You may contribute to both a Roth and a Traditional IRA in a single year, but the combined contribution may not exceed $5,500 per person.
Yes, you may convert existing Traditional IRA funds into a Roth IRA. Those who have reached their 70½ year must take any required distributions before converting to a Roth IRA. The conversion is reportable income and the taxes must be paid in the year the distribution from the traditional IRA is made.
For Traditional IRAs, you must stop contributing at age 70½. You may, however, continue to contribute to a Roth IRA past the age of 70½, as long as you have earned income in the year of the contribution.
All IRA contributions are automatically attributed to the year in which the deposit was made, with one exception: when contributions are made to a Traditional or Roth IRA between January 1 and April 15, the IRA owner may elect to have the contribution attributed to the previous tax year, provided that he or she elects this option and has not met his or her full contribution limit for the previous year.
When can I start to withdraw funds from my IRA?
For a Traditional IRA, withdrawals from the account proceeds (also called distributions) are IRS penalty-free under any of the circumstances below. You are:
- Age 59½
- First home purchase (up to $10,000)
- Higher Education
For a Roth IRA, qualified distributions are tax-free and IRS penalty-free as long as the IRA has been in existence for at least five years and you meet one of the requirements below. You are:
- Age 59½
- First home purchase (up to $10,000)
Roth IRA funds paid to your beneficiaries upon your death are income tax-free and IRS penalty-free as long as the IRA has been in existence for at least five years. (With a Traditional IRA, your account will be subject to regular income taxes, but not additional penalties, when it is distributed upon your death.) You may withdraw the original funds you contributed to a Roth IRA at any time, tax-free and without federal penalty. (If you make withdrawals from an IRA Certificate account, however, you may be subject to a separate CEFCU withdrawal penalty, based on the terms of the account. See the CEFCU Certificate Account Rate Schedule for penalty and fee information.).
With a Traditional IRA, you will be required to begin taking distributions no later than April 1 of the year following the year in which you reach the age of 70½. You are not required to begin taking distributions from a Roth IRA at any specific age.
You can enjoy federal insurance up to $250,000 by the National Credit Union Administration (NCUA) on CEFCU Traditional and Roth IRAs. This federal insurance coverage is in addition to the $250,000 insurance on your other CEFCU accounts.
There are changes that will affect any IRA rollover.
Consult your tax advisor to determine your eligibility for, contribution limits to, and tax consequences of IRAs. Find current IRA rates and terms online or call CEFCU's 24-hour Rate Line at 309.633.3600 or 1.800.447.2478.Back to top