Today is
Home
Products
Services
Rates
ATM Locations
Credit Cards
Links
Sitemap


Traditional IRAs

What is an IRA?
Who is eligible to contribute to an IRA?
I am not an active participant in an employer-sponsored retirement plan.  May I deduct IRA contributions?
I am an active participant in an employer-sponsored retirement plan.  May I deduct IRA contributions?
Are IRA earnings, such as interest and dividends, tax-deferred?
How much can I contribute to an IRA?
Must I contribute the full amount each year?
When can I make withdrawals?
Can I make earlier withdrawals?
When are taxes paid on IRAs?
What is the deadline for contributing to an IRA?
 
Q What is an IRA?
A An Individual Retirement Account (IRA) is a special savings plan authorized by the Federal government to help you accumulate funds for your retirement.
 
Q Who is eligible to contribute to an IRA?
A Every individual who has earned income or received alimony may contribute to an IRA.  Income from other sources such as investments or inheritances does not qualify.  Contributions may not be made for or after the year in which you reach age 70.5.
 
Q I am not an active participant in an employer-sponsored retirement plan.  May I deduct IRA contributions?
A If you are not an active participant in an employer-sponsored pension or profit-sharing plan, you can deduct 100% of your IRA contribution regardless of income level.  If your spouse is an active participant and your joint income is $150,000 or more you cannot fully deduct your IRA contribution.  Partial deductions are permitted for joint incomes between $150,000 and $160,000.

 

Q I am an active participant in an employer-sponsored retirement plan.  May I deduct IRA contributions?
A Your IRA contribution may still be fully or partially deductible, depending on you income level.

Top of Page

Q Are IRA earnings, such as interest and dividends, tax-deferred?
A All the earnings you accumulate in your IRA remain tax-sheltered until withdrawn.

 

Q How much can I contribute to an IRA?
A You can contribute all or part of compensation in years 2002-2004, up to:
  • Individual Taxpayer - $3,000
  • Married Taxpayer - $6,000 where both spouses have earned income (each spouse can contribute up to $3,000 each)
  • Spousal IRA - $6,000 for married taxpayers filing jointly (yearly contributions may be divided between the accounts, provided the total contribution does not exceed $6,000 and neither account is allocated more than $3,000)

Total yearly contribution that can be made by an individual to all IRAs, Traditional (deductible, nondeductible) and Roth IRAs, is $3,000 not counting rollover contributions.

To make up for lost time, workers 50 and older before the end of the taxable year can make additional contributions above the new maximum limits as follows:

  • $500 a year (years 2002-2005)
  • $1,000 a year (year 2006 and thereafter)

Top of Page

Q Must I contribute the full amount each year?
A No.  You can contribute any amount your budget allows, either in one or more contributions.  In fact, if you choose, you need not make any contributions in a given year.

 

Q When can I make withdrawals?
A Withdrawals (distributions) are permitted any time after age 59.5 but must start by April 1st following the year in which the participant reaches the age of 70.5.  After age 59.5, you may make withdrawals even if you continue to earn income.  It is not necessary to be retired in order to make withdrawals.

Top of Page

Q Can I make earlier withdrawals?
A There is a 10% penalty for withdrawing all or any part of the account before age 59.5, with the following exceptions:
  • in the event of death or total disability
  • you may withdraw nondeductible contributions (earnings on these contributions will be taxable)
  • as a qualified first-time homebuyer you may withdraw up to $10,000 during your lifetime.  It must be used within 120 days to pay costs (including reasonable settlement, financing or other closing costs).  This exception is available for expenses of the individual, spouse, child, grandchild, or ancestor of such individual or spouse.
  • if you use the withdrawal to pay qualified higher-education expenses
  • if you use the withdrawal to pay for medical expenses in excess of 7.5% of your adjusted gross income or to purchase health insurance after receiving unemployment compensation for more than 12 weeks.
  • if the funds are paid out in a series of payments made over your life expectancy (or the joint life expectancy of you and your beneficiary)

Top of Page

Q When are taxes paid on IRAs?
A When you begin making withdrawals, you will be taxed on only the amount you withdraw each year on which taxes have not previously been paid.  The remaining funds continue to accumulate tax-deferred earnings.  In all probability, you will benefit by the fact that you will be in a lower tax bracket than at the time you made the contribution.

 

Q What is the deadline for contributing to an IRA?
A You can open or make contributions to your IRA any time up to and including the due date of your tax return for the previous tax year, normally April 15th.

Top of Page

 
[ Home | Products | Services | Rates | ATM Locations | Credit Cards | Links | Sitemap ]
Privacy PolicyDesign & Hosting by Harland Financial Solutions, Inc. Browser Requirements Copyright Harland Financial Solutions, Inc. All Rights Reserved.
Each depositor is insured to at least $250,000 and backed by the full faith and credit of the United States Government