Consult our banker today to set up an account.
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Accounts Summaries |
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Traditional IRA |
Roth IRA |
Designed for: |
Customers who want to take advantage of tax-deferred earnings and possible yearly deductions.
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Customers who want to take advantage of potential tax-exempt treatment of withdrawals.
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Benefits: |
If eligible, your contributions may be tax-deductible and you don’t pay taxes on the account’s earnings until you withdraw them. This is an advantage if you expect to be in a lower tax bracket when you retire.
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If eligible, your contributions are made in after-tax dollars but earnings on qualified withdrawals are free from federal taxes. This is an advantage if you expect to be in a higher tax bracket at retirement as during working years.
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Eligibility to Contribute: |
You can contribute up to the year you turn 70 ½ as long as you have earned income.
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There are no age limitations. Your Modified Adjusted Gross Income (income before certain deductions) determines your eligibility to contribute to a Roth IRA.
If you’re single and your Modified Adjusted Gross Income (MAGI) is:
- $95,000 or less, you may contribute the maximum annual contribution limit to a Roth IRA
- Between $95,000 and $110,000, you may make a partial contribution to a Roth IRA
- More than $110,000, you may not contribute to a Roth IRA
If you’re married and your joint MAGI is:
- $150,000 or less, you may contribute the maximum annual contribution limit to a Roth IRA
- Between $150,000 and $160,000, you may make a partial contribution to a Roth IRA
- More than $160,000, you may not contribute to a Roth IRA
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Spousal IRA Eligibility: |
May be opened for a non-working spouse.
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May be opened for a non-working spouse.
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Maximum Annual Contribution: |
2005 tax year: $4000 ($4,500 age 50 and older)
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2005 tax year: $4000 ($4,500 age 50 and older)
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Tax-Deductible Contributions |
You may be able to deduct your contributions depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits.
If you are covered by a retirement plan at work
2005 tax year:
- Fully deductible if MAGI is less than $50,000 (single) or $70,000 (joint)
- Partially deductible if MAGI is between $50,000 and $60,000 (single) or $70,000 and $80,000 (joint)
- No deduction if MAGI is over $60,000 (single) or $80,000 (joint)
If your spouse is covered by a retirement plan at work
- Fully deductible if MAGI is less than $150,000 (joint)
- Partially deductible if MAGI is between $150,000 and $160,000 (joint)
- No deduction if MAGI is over $160,000
If neither spouse is covered by a retirement plan at work, the contributions are fully deductible, regardless of income level.
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Contributions are made in after-tax dollars; no deductions are allowed.
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Taxation of Earnings and Withdrawals |
Tax-deductible contributions and earnings are taxed as ordinary income when withdrawn.
After-tax contributions are withdrawn tax-free. |
Contributions (all are made after tax) and earnings are income tax-free if the account is held for 5 years and earnings are withdrawn due to:
- Attaining age 59 ½
- First time home purchase ($10,000 lifetime limit)
- Disability
- Death
Withdrawal of earnings for non-qualified reasons may be taxed as ordinary income and subject to an early withdrawal penalty.
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Are rollovers and transfers permitted? |
Yes.
- You may transfer to and from other Traditional IRAs.
- You may rollover from qualified employee-sponsored plans.
- You may convert to a Roth IRA if MAGI is under $100,000.
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Yes.
- You may convert from a Traditional IRA if MAGI is under $100,000. (Tax must be paid on deductible contributions and all earnings upon conversion.)
- To transfer from a qualified employer retirement plan to a Roth IRA, you must first rollover fund to Traditional IRA.
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Required withdrawals |
Must begin at age 70 ½
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Upon death of owner |
Withdrawal penalties |
10% IRS early withdrawal penalty if withdrawn before age 59 ½ unless exception applies.
Exceptions:
- Death
- Disability
- Medical expenses in excess of 7.5% of adjusted gross income
- Health insurance premiums if unemployed for 12 consecutive weeks
- Qualifying higher education expenses
- Qualifying first time home purchase ($10,000 lifetime limit)
- Substantially equal payments made over life expectancy
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Withdrawal of earnings may be subject to a 10% IRS early withdrawal penalty if withdrawn before age 59 ½ unless exception applies.
Exceptions:
- Death
- Disability
- Medical expenses in excess of 7.5% of adjusted gross income
- Health insurance premiums if unemployed for 12 consecutive weeks
- Qualifying higher education expenses
- Qualifying first time home purchase ($10,000 lifetime limit)
- Substantially equal payments made over life expectancy
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