Individual Retirement Accounts (IRAs)

A Tax-Advantaged Way to Save for Your Retirement

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 2016 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 $5,500 (or taxable compensation)

Married filing jointly $11,000 (up to $5,500 each)

If you are age 50 or over you can contribute an additional $1,000 (catch-up contribution)

Individual $5,500 (or taxable compensation)

Married filing jointly $11,000 (up to $5,500 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 $117,000 (single) or $184,000 (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:
  • Age 59½ or more
  • Disability or death
  • First-time homebuyer
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.