Individual Retirement Accounts (IRAs)
Traditional IRAs and Roth IRAs
Individual Retirement Accounts (IRAs) are an excellent way to save for the future. An IRA is a retirement plan account that provides tax advantages for retirement savings.
A First Bank and Trust IRA offers:
- Flexible Terms ranging from 6, 12, or 18 months to 2 or 5 years
- Interest compounded and credited to the account quarterly
- No monthly service fees
The following guidelines are applicable to the 2009 tax year.
| Traditional IRAs | Roth IRAs |
|---|---|
| Account Overview | |
| Traditional IRAs are front-ended meaning the funds deposited are often tax-deductible or a rollover from another retirement plan where taxes have not been paid
The minimum amount required to open an IRA is $1,000 |
Roth IRAs are back-ended meaning the funds deposited are always after-tax or a rollover from a Traditional IRA where taxes have been paid before the transfer
The minimum amount required to open an IRA is $1,000 |
| Maximum Annual Contribution | |
| Individual $5,000 (or taxable compensation)
Married filing jointly $10,000 (up to $5,000 each) If you are age 50 or over you can contribute an additional $1,000 (catch-up contribution) |
Individual $5,000 (or taxable compensation)
Married filing jointly $10,000 (up to $5,000 each) If you are age 50 or over you can contribute an additional $1,000 (catch-up contribution) |
| Eligibility | |
| Anyone under the age of 70 with earned income
Spouses with little or no income who file jointly are eligible for a Spousal IRA. If one spouse has little or no earned income, their combined income must be equal to or greater than the total IRA contribution for that year |
Anyone with gross earned income below $105,000 (single) or $166,000 (married filing jointly). Please check with your tax advisor
Spouses with little or no income who file jointly are eligible for a Spousal IRA. If one spouse has little or no earned income, their combined income must be equal to or greater than the total IRA contribution for that year |
| Tax Deductibility of Contributions | |
| Tax deductibility is based on retirement plan coverage, adjusted gross income and filing status. Please check with your tax advisor
Contributions allowed up to age 70 if still earning income |
Not tax-deductible |
| Earnings | |
| Earnings are tax-deferred | Earnings are tax-free |
| Required Age of Distribution | |
| Distributions start by age 70 | No required age |
| Withdrawals | |
| Withdrawals can be made at age 59½ without penalty
Withdrawals before age 59½ are subject to income taxes plus a federal penalty for premature distributions, unless the withdrawal meets criteria |
Withdrawals of contributions and earnings are allowed without penalty if your Roth IRA has been open for 5 years AND one of the following applies:
|
| Qualified Early Withdrawals | |
| First-time home purchase ($10,000 lifetime limit)
Disability of contributor Medical expenses that exceed 7.5% of your adjusted gross income Payments of health insurance premiums under certain circumstances Qualified higher education expense |
First-time home purchase ($10,000 lifetime limit)
Your disability Medical expenses that exceed 7.5% of your adjusted gross income Payments of health insurance premiums under certain circumstances Qualified higher education expense |
You can fund both a Traditional and Roth IRA in the same year just as long as you do not exceed the annual contribution limit per individual.
For more information on IRAs and the impact on your finances and taxes, consult your tax advisor. To open an IRA, please see your FBT Banker at any branch location or call First Bank and Trust toll-free at 1-877-426-2498.
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