IRAs

An Individual Retirement Account makes a lot of sense when planning your retirement or your investment future.

Your Social Security benefits and pension are not intended to provide all of your retirement income. And planning ahead to pay for an education, or to buy a house, or any future goal is always wise.

Today's IRAs provide more tax benefits and greater earnings than in previous years. You can choose from taking advantage of yearly tax deductions now, or save your tax breaks for future withdrawals. How you want to pay your taxes determines your IRA choice.

You can choose from or build a series of IRAs:

• Traditional IRA
  • Traditional IRA Brochures
  • Traditional IRA Trust Application
• Roth IRA
  • Beneficiary Payment Options
  • Roth IRA Trust Application
• We offer the following investment options for the above IRA types:
  • IRA Money Market Savings
  • IRA Certificate of Deposit
• Education IRA
• Education/Coverdell IRA Application
• IRA Direct Transfer

View Disclosures

Traditional IRAs (Individual Retirement Accounts)

• Traditional IRA Brochures

An IRA account holder with earned income may make yearly contributions up to the age of 70. Some individuals receive a non-refundable tax credit for contributions. Contributions to Traditional IRAs may or may not be deductible. Regardless of whether or not an IRA deduction is received for the contribution, the earnings generated on contributions to Traditional IRAs are tax-deferred. IRA holders do not include earnings from Traditional IRAs in income until the year a distribution is taken.

While there are numerous benefits to opening a Traditional IRA, a Roth IRA is an option for those who wish to receive tax-free qualified distributions. Unlike a Traditional IRA, Roth IRA contributions use after-tax dollars and income limitations apply.

Roth IRAs (Roth Individual Retirement Account)

• Beneficiary Payment Options

Anyone, regardless of age, who has earned income that does not exceed the limits set by Congress, can contribute to a Roth IRA. All contributions to a Roth IRA are made with after-tax dollars, grow tax-deferred and may be withdrawn tax-free; therefore no tax deduction may be taken. Unlike a Traditional IRA, contributions can be made past the age of 70. Regardless of age, you have access to all contributions (excluding earnings) tax-free, and without penalty unless they are conversion contributions (without a 72T exception) which are subject to a 10% penalty. In order to receive tax-free and penalty-free distributions on both your contributions and earnings, distributions must be considered "qualified distributions."

If you're ineligible for a Roth IRA due to income limitations or if you're interested in making contributions that may be tax-deductible, a Traditional IRA might be a better solution.

Talk to your accountant or tax preparer about your Roth IRA options, then come and see us. We are your Roth IRA source.

Education IRA

Education IRA

Coverdell Education Savings Account ("ESA")

A Coverdell Education Savings Account ("ESA") , formerly and still more widely known as an "Education IRA", is a trust or custodial account created exclusively for the purpose of paying the "qualified education expenses" of a specified living beneficiary; hence, a College Savings Plan. These Plans began accepting contributions as of January 1, 1998, and from then through 2001 only allowed for a maximum contribution of up to $500. As of 2002 that contribution is increased as shown in the above chart. Education IRAs can also accept contributions by corporations, tax-exempt organizations, and other entities.

Covered, "eligible expenses", were expanded in 2002 to include costs for grades K1-K12, public, private, religious, and college, and include such "qualified higher education, elementary & secondary education expenses" as: tuition, fees, books, supplies, equipment required for enrollment or attendance, computer and software used during attendance (non game, hobby or sports), tutoring, extended day programs (as required or provided by the institution), computer equipment, special needs services, room & board if at least a half-time student (at the schools posted room rate, otherwise limited to $2,500 for students living off campus, and not at home), uniforms & extended day program costs, and also contributions made to a qualified state tuition program.

Taxation Issues Regarding - Contributions, Earnings & Distributions:

• Contributions are not tax deductible and are instead treated as "completed present interest gifts" for gift tax purposes. Contributions may be made up until April 15th of the following year, not including any extensions. Contributions may be made to both Education IRA & Section 529 College Savings Plans without triggering a 6% excise tax as prior to 2002.
  
  
• Earnings on contributions are not taxed until distribution.
  
  
• Taxation on distributions for "Eligible Education Expenses" - contributed principal or generated earnings are not taxable.
  
  
• Taxation on distributions for "Ineligible Education Expenses" - contributed principal or generated earnings are taxable. Such distributions are taxed under IRC Section 72 annuity rules in the following manner:
  
  
  • Contribution Portion Distributions - subject to income tax.
    
    
  • Earnings Portion Distributions - subject to income tax PLUS a 10% penalty tax. Termination of an Education IRA after 30 days of a beneficiary turning age 30 will result in taxation on the earnings portion of any assets not used or distributed for their intended education purpose, PLUS a 10% penalty tax. The penalty will not apply on distributions made on account of either death or disability, or individuals with "special needs" as so defined.
    
    
• The Hope Scholarship Credit and Lifetime Learning Credit - As of 2002 there is no longer a restriction on using this Credit during the same year you make a withdrawal from an "Education IRA", as long as they are used for separate expenses.

Account Beneficiary Flexibility:
The question often arises "may the designated beneficiary of the account be changed from one child to another, or to some other party without triggering a tax?" The answer is YES!

The restrictions on this are that it may be done but only with or for "Account Beneficiaries" that are defined as - "qualified family members"; namely, spouse, child, stepchild, daughter-in-law, son-in-law, mother, stepmother, mother-in-law, father, stepfather, father-in-law, sister, half sister, stepsister, sister-in-law, brother, half brother, stepbrother, brother-in-law, aunt, uncle, niece, nephew, first-cousin, or the spouse of any of the foregoing.

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