IRAs

Individual Retirement Accounts (IRAs)
Today, you can't count on your pension or Social Security benefits to provide all of your retirement income. Individual Retirement Accounts (IRAs) let you save money to supplement your pension or Social Security benefits. With a Choice One IRA, you can save money now, take advantage of yearly tax deductions, plus defer taxes on the interest your IRA accumulates.

Most members are eligible, although there are some restrictions. For each IRA, there are income caps and other limitations that apply. For more information, contact the credit union and your tax advisor to see if an IRA works for you.

It's Your Choice!
Your credit union has a full range of IRA options to choose from:

Traditional IRA
A Traditional IRA is still the best IRA for long term retirement planning. You don't pay taxes now on these retirement accounts, when your income is high. At retirement, you are able to take out your funds or roll them over into another option. Taxes paid then are considerably less, since your income will be less.
Here are some facts about traditional IRAs:

• You must be under age 70 ½ to be eligible for a traditional Nondeductible IRA.
  
• Non-working spouses can now make fully deductible contributions to an IRA, even if their spouse participates in a retirement program, as long as their joint income does not exceed $150,000.
  
• You may invest up to $3,000 each year for singles and $6,000 for married couples filing jointly.
  
• You may be able to withdraw money before age 59 ½ without a penalty to purchase a first home (up to $10,000 maximum) or pay qualified costs of higher education.

For more information about IRAs, speak to your financial advisor. Contact your credit union to open your IRA today and start saving for tomorrow.

Roth IRA
If you know you will need your money sooner than retirement, consider the Roth IRA. Savings for a down payment on a house or other expenditure will add up to more with the higher interest paid on a Roth IRA. While you will have to pay taxes on the funds now, you will be saved those taxes when you use the money, and you do not incur any penalties for withdrawal after 5 years.

Here are some key elements of the Nondeductible Roth IRA:
- Penalty free withdrawals after 5 years
- Tax free earnings after age 59 1/2
- Contributions allowed after age 70 1/2 when employed
- No required distribution at age 70 1/2 or in your lifetime
- Tax-free if used for first home purchase (up to $10,000) or education
- Tax-free if disabled or upon death

There are guidelines based upon Adjusted Gross Income (AGI) which will increase progressively until 2001.

Coverdell Educational Account*
Contributions may be made to your Coverdell Educational Account until December 31st of the tax year. Parents, grandparents, other relatives, friends, and even minors (with earned income) can set up an account for any designated beneficiary under age 18. You can make nondeductible contributions of up to $2,000 per child each tax year. The accumulation of interest and withdrawals are tax-free as long as the funds are used for financing Elementary, Secondary and Post-secondary education expenses.

If the beneficiary is not going to use the money for education expenses, it must be withdrawn by age 30. The Coverdell Education Account can be rolled over into another child's account in the same family. The contributions to this account do not count toward your $3,000 single taxpayer or $6,000 married taxpayer (filing jointly) IRA contributions. You can save for a child's education and maximize your own IRA every tax year.

2002 Tax Law IRA Provisions
Beginning in 2002, the new tax law will increase the amount you can contribute to an Individual Retirement Account (IRA).

Traditional and Roth IRA
Traditional and Roth IRA tax-year contributions will increase from the current $2,000 single taxpayer limit to progressively higher limits according to this Internal Revenue Code 219(b)(5)(A),(C) schedule:

• Eligible married couples filing jointly can also take advantage of the increases.

IRA Tip
The best way to save with an IRA is to make regular contributions throughout the year. For example, if you contributed to your IRA weekly (each contribution would be about $57.69), your money instantly begins generating earnings. By tax-time, your contributions have been compounding interest all year long. Over the next 10, 20, 30 years, the additional earnings would be significant.

Whatever your IRA plans, call us. We are your IRA source!

*Formerly the Education IRA.