INDIVIDUAL RETIREMENT ACCOUNTS

An Individual Retirement Account (IRA) is an excellent tool for retirement savings. Unlike most investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free. Perry Point Federal Credit Union offers both a Traditional IRA and a Roth IRA. The National Credit Union Administration, a U.S. Government agency, insures all of your IRA deposits in our credit union up to $250,000. This is in addition to the $100,000 insurance on your non-IRA deposits.

We offer both an IRA Share Savings Account and IRA Share Certificates. The IRA Share Savings Account is the ideal account when you're just starting to save because there's no minimum balance required. It’s also good to use when you begin withdrawing from your IRA because it has no early withdrawal penalties as there are with IRA Share Certificates. Our IRA Share Certificates are available with terms of 6, 12, 18, 24, 30 and 36 months. They're an ideal way to save long-term because they offer a higher dividend rate than the IRA Share Savings Account. You must have a minimum balance of $500 to open an IRA Share Certificate. You can split your IRA between any combination of Traditional, Roth, IRA Share Savings, and IRA Share Certificates as long as you don’t exceed the maximum annual contribution limits as noted in the chart below.

Traditional IRA
A Traditional IRA is a type of retirement account that has been in existence since 1975. Traditional IRA’s offer tax-deferred earnings and the possibility for tax-deductible contributions. These tax advantages make the traditional IRA a powerful tool in creating a balanced, long-term savings plan.

Roth IRA
A Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. Named for former Senate Finance Committee Chairman William Roth, Jr., this IRA offers more incentives to boost your retirement savings, as well as more ways to use your nest egg.

CURRENT RATES
RETIREMENT CALCULATOR


The following chart is a summary of the differences between Traditional and Roth IRA’s. For more details, ask for our free IRA brochures. The following information is not intended as tax advice. Please consult a tax professional. (MAGI refers to the Modified Adjusted Gross Income from your federal income tax return.)

  TRADITIONAL IRA ROTH IRA
Who can contribute? Anyone with income from compensation (or who is filing jointly with a spouse who earns compensation) and who will not reach age 70 1/2 by the end of the year.

Anyone who has received a distribution from a qualified retirement plan and decides to roll over the proceeds of the plan into an IRA.

Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation), with the following MAGI:

  • Up to $95,000 for single filers
  • Up to $150,000 for joint filers

Reduced contributions are allowed for higher incomes:

  • Up to $110,000 for single filers
  • Up to $160,000 for joint filers
How much can
I contribute?		 $3,000 for 2004
$4,000 for 2005 thru 2007

For owners age 50 and older, your limits increase to $3,500 for 2004, $4,500 for 2005, and $5,000 for 2006 and 2007

Cannot exceed compensation

Reduces contributions that can be made to Roth IRA’s		 $3,000 for 2004
$4,000 for 2005 thru 2007

For owners age 50 and older, your limits increase to $3,500 for 2004, $4,500 for 2005, and $5,000 for 2006 and 2007

Cannot exceed compensation

Reduces contributions that can be made to Traditional IRA’s
Who can make deductible contributions?

Fully deductible contributions can be made by:

  • Single individuals not active in employer
    retirement plans
  • Single individuals active in employer retirement plans with MAGI of less than:
    - $45,000 (2004)
    - $50,000 (2005 – 2010)
  • Married couples with neither spouse active in an employer retirement plan
  • Married individuals active in employer retirement plans with joint tax returns showing MAGI of less than:
    - $65,000 (2004)
    - $70,000 (2005)
    - $75,000 (2006)
    - $80,000 (2007 – 2010)
  • Married individuals not active in employer retirement plans with spouses who are, as long as MAGI is $150,000 or less
 No one can deduct contributions
What are the
tax advantages?		 Earnings grow tax-deferred until withdrawn

Contributions may be tax-deductible		 Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59 1/2, disability, death, or a first-time home purchase [lifetime limit for exemption on first-time home purchase is $10,000])

Not required to start withdrawals at age 70 1/2
When can I withdraw without restrictions?

Withdraw penalty-free for any of the following reasons:

  • Qualified higher-education expenses
  • First time home purchase (lifetime limit for exemption on first-time home purchase is $10,000)
  • Age 59 1/2
  • Disability
  • Qualifying medical expenses exceeding 7.5% of adjusted gross income
  • Payment to beneficiaries upon owner’s death
  • Payment of health insurance premiums while unemployed for 12 weeks or longer

Regular contributions can be withdrawn tax-free and penalty-free at any time

After the account has been open five tax years, earnings can be withdrawn tax-free and penalty-free for any of these reasons:

  • Age 59 1/2
  • Disability
  • Death
  • First-time home purchase (lifetime limit for exemption on first-time home purchase is $10,000)
When must I start making withdrawals? Must begin by April 1 of the year after you reach age 70 1/2 You are not required to make withdrawals, however, minimum distributions must be made to your beneficiaries after your death

 
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