Traditional IRA

A Traditional IRA is still the best IRA for long term retirement planning.
Here are some facts about traditional IRAs:

• 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.
  
• You must be under age 70 1/2 to be eligible for a traditional Nondeductible IRA.
  
• Non-working spouses can 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 be able to withdraw money before age 591/2 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.

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.

Beginning in 2002, the new tax law will increase the amount you can contribute to an Individual Retirement Account (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:

2002-2004 $3,000
2005-2007 $4,000
2008 $5,000
2009 $500 Increments indexed to inflation

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

Individuals who are age 50 and older before the end of the taxable year, and before application of the Adjusted Gross Income phase-out limits, can increase their IRA contribution by: • $500 for 2002 through 2005 • $1,000 for 2006 and thereafter.

Share Certificates (CDs) are also available as IRA investments. An IRA Share Certificate requires a $500.00 investment and terms range from 3 months to 5 years. When planning your retirement or investment future, be sure to consider these higher yield certificates. They can be rolled over at the end of their term into other IRA options, so start planning now.
Remember that early withdrawals do incur penalties.