The Wright CU

One of the greatest challenges facing Americans today is ensuring the financial well being and security of your family throughout your retirement years. With uncertainty over the adequacy of social security growing daily, it’s increasingly necessary to rely on your own savings plans and resources to support your future retirement plans.

Yet another challenge is finding additional money for the impending college education expenses for your children. Tuition and other collegiate expenses are on the rise, so it’s a good idea to get a head start on saving for those expenses now, instead of getting caught unprepared later!

At The Wright Credit Union, we offer 2 main savings accounts geared to help you save for your family’s future: Traditional IRAs and Roth IRAs. A minimum of $1000.00 is required to set up a share certificate.

TRADITIONAL IRAs

Traditional IRAs are valuable long-term savings tools that can provide safety and security for you and your family. Your contributions can be deducted from your taxable income, reducing the income taxes you are currently paying.

Traditional IRA Features:

Can be opened and funded without any employer participation
Contributions and/or earnings are tax-deferred earnings until retirement
Offer possible deductions based on retirement plan participation and income
Provide full accessibility to your funds; 10% early distribution penalty if younger than 59 ½ years
Are completely flexible as there is no minimum contribution in any year
Members under age 70 ½ years may contribute a maximum of $5K per year

Contributing to your Traditional IRA:

You can contribute to your IRA as long as you:

Have not reached the year in which you turn 70½, and
Have earned income equal to or greater than the Traditional IRA contribution

You can contribute up to the lesser of:

100% of earned income, or
$5K

Spousal Contributions:

Your spouse can fund your IRA with certain dollar limits on contributions and deductions. To be eligible to establish a spousal IRA, the following requirements must be met:

You must be married and file a joint federal tax return
One spouse must have compensation or earned income equal to or greater than the IRA contribution
An IRA must be established for the non-compensated spouse
The spouse receiving the contribution must be under age 70½
Spouses may contribute $5K per taxable year, plus catch up contributions if eligible

Catch Up Contributions:

IRA holders that reach 50 years of age prior to the end of the taxable year may be eligible to contribute an additional $1K to a Traditional IRA as a catch-up contribution.

Deadline for Contributions:

You must make regular, spousal and catch-up IRA contributions to Traditional IRAs by the due date of your federal income tax returns, April 15th in most cases.

Nondeductible Contributions:

You can make nondeductible contributions if you are not eligible for a tax deduction or if you choose not to take a deduction. The combined total of deductible and nondeductible contributions cannot exceed the annual contribution limit of $5K, plus catch-up contributions if eligible, or 100% of earned income, whichever is less.

Tax Credits:

You might be able to receive the Saver’s Tax Credit, equal to a percentage of your IRA and retirement plan contributions up to $2K. To be eligible for the tax credit, you must:

Be 18 years old prior to the end of the taxable year
Not be a dependent or a full-time student
Have adjusted gross income (AGI) within limits

Transfers & Rollovers:

You can move money from one IRA to another of the same type via a transfer or rollover.

A transfer is a direct movement between like IRAs, generally from one financial organization to another, but can occur between like IRAs at the same institution. You can make an unlimited number of transfers in a year. The transfers may be for all or any part of an IRA balance.

With a rollover, you, your surviving spouse beneficiary, or your former spouse actually receives the money or property through a distribution before rolling it into another IRA. The distribution that is eventually rolled into an IRA is treated as any other type of distribution at the time it is taken from the IRA. So the withholding rules still apply. The distributing financial organization reports the distribution to the IRS, and the receiving organization reports the rollover contribution to the IRS.

Accessibility to Funds:

Full access to your IRA funds is always guaranteed with a Traditional IRA. Taxable distributions taken from a Traditional IRA before the IRA holder reaches age 59½ are generally subject to a 10% penalty. This is to discourage people from taking distributions prior to reaching age 59½. The 10% early distribution penalty does not apply in the following situations:

59½ year of age
Death
Disability
Medical expenses
Health insurance premiums following unemployment
First home purchase
Higher education expenses
IRS levy
Series of substantially equal periodic payments
Qualified reservist distributions

Mandatory Distributions:

Beginning in the year that a Traditional IRA holder turns 70½ years of age, distributions from a Traditional IRA become mandatory. You must begin taking money out of your IRA by April 1st following the year you turn 70½ years old. These distributions are based on your IRA balance divided by your life expectancy, either singly or jointly with your beneficiary. If you fail to take your required distribution, you will be subject to a substantial penalty.

To view The Wright Credit Union’s Traditional IRA rates, please click here or click here for the retirement calculator.

ROTH IRAs

Roth IRA Features:

The money you contribute to a Roth IRA has already been taxed. So the principal amount is never subject to taxes or penalties in the future, as long as you stay within the contribution guidelines.
Roth IRAs enable the money you contribute to grow tax-deferred. If you do not withdraw any of the earnings until you have had the IRA for at least 5 years and have a qualifying event, those earnings become tax-free.
There is no 70½ year age limit on making contributions. You do, however, need earned income, which is defined the same as for Traditional IRAs. As long as you satisfy the Roth IRA requirements, you may contribute to a Roth IRA, even after the year in which you reach 70½ years.

Contributing to your Roth IRA:

Annual contribution limit is the lesser of $5K or 100% of your earned income
Contribution eligibility depends on your, or you and your spouse’s modified adjusted gross income (MAGI) and income tax filing status. The amount you can contribute may be reduced depending on your MAGI
Individuals with MAGI of $105K or less can contribute the maximum annual contribution of $5K plus catch-up contributions, if eligible
Individuals with MAGI of more than $105K and less than $120K can make partial contributions
Individuals with MAGI of $120K+ may not contribute to Roth IRAs
Married individuals who file joint income tax returns with joint MAGI of $166K or less may contribute the maximum annual contribution
Married individuals who file joint returns with joint MAGI of $166K+ and less than $176K may make partial contributions
Married individuals who file joint returns with MAGI of $176K+ cannot contribute for that year
Married individuals who file separate returns with MAGI of less than $10K may make partial contributions
Married individuals who file separate returns with MAGI of $10K+ cannot contribute

Catch Up Contributions:

IRA holders that reach 50 years of age prior to the end of the taxable year may be eligible to contribute an additional $1K to a Roth IRA as a catch-up contribution.

Deadline for Contributions:

You must make regular, spousal and catch-up IRA contributions to Roth IRAs by the due date of your federal income tax returns, April 15th in most cases.

Qualified Distributions:

You may take a qualified distribution from a Roth IRA tax and penalty free. A distribution of Roth IRA is considered qualified if the IRA has been open for a minimum of 5 years or if the withdrawal must be made because of one of the following events:

Age 59½
Death
Disability
First home purchase

Moving funds from Traditional IRA to Roth IRA:

Specific rules govern the process of converting funds from a Traditional to a Roth IRA including:

Your MAGI must be $100K or less (For the tax year beginning January 1, 2010, there is no income limit on the conversion of a Traditional IRA to a Roth IRA)
If you are married, you must file a joint income tax return (For the tax year beginning January 1, 2010, there will not be a requirement for married couples to file a joint income tax return in order to convert a Traditional IRA to a Roth)
You must pay taxes on all the pretax dollars that you convert
Assets are not subject to the 10% penalty if properly converted

Mandatory Distributions:

There are no required minimum distributions due at 70½ years of age as with the Traditional IRA. Earnings can continue to grow until you want to take a distribution. However, there are special distribution requirements when these plans pass to your beneficiaries.

Click here for branch office phone numbers. To view current rates click here or click here for the retirement calculator.

Certain restrictions and conditions apply. Not all tax advantages may be available to you. To determine your eligibility, the current status of applicable state and federal laws and the right plan for your needs, please consult your tax advisor.

* The Credit Union provides no legal advice to members, and provides the foregoing information from a reliable resource to give our members a basic understanding of these services. You should consult with your tax or legal advisor regarding any particular and the current status of applicable federal and state laws.

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