Individual Retirement Account (IRA)
Tax-Advantaged Saving1
Tax benefits and compounding can save you more over time.
Low Minimum Deposit
Open and maintain an account with as little as $25.
Earn Dividends2
View the current dividend rate (compounded daily, paid monthly).
Automated Savings
Set up Funds Transfer or Payroll Deduction contributions.
No Service Fees3
No charges or fees to open or service the account.
24/7 Account Access
Manage your account on the go through any of our service channels.
What Is an IRA?
An individual retirement account (IRA) allows you to save for your future retirement through an account that offers tax advantages that can maximize your earning potential over time. The earlier you begin saving in an IRA, the greater your earnings may be through tax-advantaged compounding.We offer Traditional, Roth and Simplified Employee Pension (SEP) IRAs as Share accounts to help you save for your future retirement. Credit Union Investment Services (CUIS), a wholly owned subsidiary of the Credit Union, also offers investment account IRAs.
Which IRA Is Right for Me?
The two most common types of IRAs are Traditional and Roth. You can have both types of IRAs and have multiple accounts with different institutions.4 When thinking about which IRA is right for you, consider your income expectations, how you want your money to be taxed, and penalties and limitations that may be incurred for early withdrawals. Contact one of our representatives to help you determine which option best suits your needs.Traditional IRA
Contributions made with pre-tax dollars
Earnings grow tax-deferred
Contributions may be tax-deductible5
Withdrawals required after you reach your required beginning date (RBD)6
Withdrawals may be subject to ordinary income taxes
10% early withdrawal penalty unless exception applies before age 59 ½
Roth IRA
Contributions made with after-tax dollars
Earnings grow tax-deferred with the potential to be tax-free
Contributions are not tax-deductible
Withdrawals not required at any age
Earnings withdrawn tax-free if considered “qualified”
Contributions withdrawn tax- and penalty-free at any time7
Are You Self-Employed?
If you are self-employed or work for a business that has adopted a SEP Plan, you may qualify for a SEP IRA. SEP IRAs are traditional IRAs that allow contributions from the employer, subject to certain restrictions. Contributions and earnings grow tax-deferred until withdrawn. You must start taking withdrawals when you reach your required minimum distribution age. Early withdrawals may be subject to taxes and a 10% penalty.Tax Considerations
Note: The information below is provided for informational purposes only. Consult your tax advisor for additional information regarding requirements and limitations.Eligibility Requirements to Open an IRA
Traditional IRA
- No minimum or maximum age limit
- Account owner or spouse must have earned income to make contributions
Roth IRA
- No minimum or maximum age limit
- Account owner or spouse must have earned income to make contributions
- Must meet modified adjusted gross income (MAGI) restrictions for contributions
SEP IRA
- SEP Plan must be established by employer or self-employed individual
- Employees who meet the following requirements must be included in the SEP Plan8:
- Age 21 or older
- Worked for the employer in at least 3 of the last 5 years
- Received at least $600 in compensation from the employer during the year (for 2019 and 2020)
- An employer can use less restrictive participation requirements than these listed, but not more restrictive ones.
Maximum annual contribution limits are subject to change each year by the IRS. You can contribute to more than one traditional and/or Roth IRA each year, but your total contributions cannot exceed the annual limits. Individuals over 50 can make a “catch-up” contribution of $1,000 over the normal limit each year.
If you participate in a SEP Plan, you can receive employer contributions to your SEP IRA and still make regular, annual contributions to a traditional and/or Roth IRA. However, any dollars you contribute to a SEP IRA will reduce the amount you can contribute to other IRAs.
If you participate in a SEP Plan, you can receive employer contributions to your SEP IRA and still make regular, annual contributions to a traditional and/or Roth IRA. However, any dollars you contribute to a SEP IRA will reduce the amount you can contribute to other IRAs.
Maximum Annual Contribution Limits
Traditional and Roth IRAs
Lesser of 100% of earned income or your annual contribution limit. For Roth IRAs, your modified adjusted gross income (MAGI) may reduce your contribution limits.
SEP IRA
Employers may contribute the lesser of 25% of your earned income or the SEP IRA annual contribution limit. Employer contributions do not affect the annual contribution amount you can contribute on your own behalf.
IRA contributions can be made for each tax year as explained below.
Deadlines to Contribute to an IRA
Traditional IRA
January 1 until the federal tax filing deadline of the following year
Roth IRA
January 1 until the federal tax filing deadline of the following year
SEP IRA
Until the federal tax return filing date, plus extensions
Deductions Limits for IRA Contributions
Traditional IRA
Dependent on tax filing status, participation in an employer plan and your MAGI. See the IRS website for more details.
Roth IRA
Not eligible
SEP IRA
Deductible to the employer only
It is generally intended that you not begin taking withdrawals from your IRA until you reach age 59 ½. However, withdrawals can be made at any time, but penalties and/or taxes may be due depending on your account type, age and other factors.
Penalties and Tax Requirements for Early Withdrawals
Traditional IRA
- May be subject to ordinary income tax
- 10% penalty if withdrawn before age 59 ½ unless an exception appliess
Roth IRA
- Contributions can be withdrawn tax- and penalty-free at any time.
- Qualified withdrawals of earnings are tax-free if you meet the 5-year holding period requirement and one of the following is true:
- You are 59 ½
- You are disabled
- You are deceased
- The funds are used for a first-time home purchase, up to $10,000
- Non-qualified withdrawals are subject ordinary income tax and a 10% penalty unless an exception applies.
SEP IRA
- Subject to ordinary income tax
- 10% penalty if withdrawn before age 59 ½ unless an exception applies
If you meet one of the exception reasons below, you may not have to pay the 10% penalty on withdrawals made before you reach age 59 ½. However, special rules may apply for withdrawals made from converted funds from a traditional to Roth IRA, even if an exception applies.
Penalty Exceptions for Early Withdrawals
Age
Owner reaches age 59 ½
Birth / Adoption
Limited to $5,000 per birth or adoption
Death
Owner is deceased; distributions made to beneficiary on account
Disability
Owner is totally and permanently disabled
Education
Limited to amount of qualified higher education expenses
Equal Payments
Distributions made as part of a series of substantially equal periodic payments (i.e., an annuity)
Homebuyers
Up to $10,000 for purchase of first home
Federal Tax Levy
Distributions to the IRS in response to federal levy
Medical
- Amount of unreimbursed medical expenses that exceeds 7.5% of adjusted gross income (AGI)
- Health insurance premiums paid while unemployed
Military
Qualified military reservists called to active duty
You are not required to take distributions from a Roth IRA at any age. You must begin taking withdrawals annually from traditional and/or SEP IRAs to meet your required minimum distribution (RMD) amount once you reach age 72,6 even if you are still working and contributing to your IRAs. You can withdraw more than the RMD each year if desired.
If you have multiple IRAs at different institutions, you can combine the RMD amounts and take the total from any one or a combination of accounts. For IRAs held at the credit union, your monthly statement will provide you with the RMD amount. Use the RMD worksheets on the IRS website for more information on how to calculate your RMD.
Your first RMD must be taken by your required beginning date (RBD), which is based on your birthdate. All subsequent RMDs must be taken by December 31 of each year. You could incur a tax penalty if you do not take your RMD or the full amount required each year.9
Use the chart below to determine when you must begin taking your RMD based on your date of birth.
If you have multiple IRAs at different institutions, you can combine the RMD amounts and take the total from any one or a combination of accounts. For IRAs held at the credit union, your monthly statement will provide you with the RMD amount. Use the RMD worksheets on the IRS website for more information on how to calculate your RMD.
Your first RMD must be taken by your required beginning date (RBD), which is based on your birthdate. All subsequent RMDs must be taken by December 31 of each year. You could incur a tax penalty if you do not take your RMD or the full amount required each year.9
Use the chart below to determine when you must begin taking your RMD based on your date of birth.
RMD Required Beginning Date (RBD)
Born Before July 1, 1949
April 1 of the year following the calendar year in which you reach age 70 ½
Born After June 30, 1949
April 1 of the year following the calendar year in which you reach age 72
Retirement Funds at Another Financial Institution?
If you have funds from a former employer’s retirement plan, like a 401(k), or funds in an IRA at another financial institution, you can transfer or roll over those funds to a new or existing IRA at the credit union today. Contact your local branch or our 24/7 Member Services at (888) 732-8562 to get started.
1 Neither the Credit Union nor its subsidiaries are legal or tax advisors. Consult with your tax professional before making legal or tax-related investment decisions.
2 Rates and annual percentage yields (APYs) are variable and subject to change daily at the discretion of the Board of Directors.
3 No service fee if the minimum $25 account balance is maintained. A service fee of $1 will be charged if the account falls below $25.
4 You cannot exceed the IRS contribution limits for any given year and must meet certain other eligibility requirements.
5 Deductibility depends on tax filing status, participation in an employer plan and modified adjusted gross income (MAGI).
6 You must start taking distributions by April 1 following the year in which you turn 72 (70 ½ if you reach age 70 ½ before January 1, 2020).
7 While you may withdraw contributions tax-free at any time, withdrawal of Roth IRA earnings before you reach age 59 ½ and before the account is five years old may be subject to tax and penalties.
8 Eligibility exclusions may apply.
9 The CARES Act has temporarily waived the requirement to take a required minimum distribution for the year 2020.
2 Rates and annual percentage yields (APYs) are variable and subject to change daily at the discretion of the Board of Directors.
3 No service fee if the minimum $25 account balance is maintained. A service fee of $1 will be charged if the account falls below $25.
4 You cannot exceed the IRS contribution limits for any given year and must meet certain other eligibility requirements.
5 Deductibility depends on tax filing status, participation in an employer plan and modified adjusted gross income (MAGI).
6 You must start taking distributions by April 1 following the year in which you turn 72 (70 ½ if you reach age 70 ½ before January 1, 2020).
7 While you may withdraw contributions tax-free at any time, withdrawal of Roth IRA earnings before you reach age 59 ½ and before the account is five years old may be subject to tax and penalties.
8 Eligibility exclusions may apply.
9 The CARES Act has temporarily waived the requirement to take a required minimum distribution for the year 2020.