Save for your future.
With a Traditional IRA, your contribution is tax deferred…which means you won’t be taxed on it until you withdraw it from your account after retirement. At this time, you’ll likely be in a lower tax bracket so the tax bite shouldn’t hurt as much. There are a couple words of caution here…if you’re covered by a pension, 401K, SEP, KEOGH or other retirement plan at work, your contributions are not tax deductible. You can contribute up to $5,000 per person per year to a traditional IRA, or $6,000 if you’re over 50 years. Check with a tax advisor about deductible amounts and future tax savings.
You don’t receive a tax deduction on your Roth IRA contribution, but your money grows tax free, which makes it a very attractive option. Making it even more attractive is the fact that you can open and contribute to a Roth even if you are covered by a retirement plan at work (just make sure you fall within the income limits) …so you can use your Roth to augment your employer-sponsored plan. Contributions can be made of up to $5,000 per year per person, or $6,000 if you’re over 50 years.
Coverdell Education Savings Account
This is what was formerly known as an Education IRA. You can put away money here, up to $2,000 per year, and have the earnings grow tax-free so long as the proceeds are used to pay for qualifying educational expenses. And what qualifies? Almost any educational cost, from private or parochial elementary through high school all the way through college expenses. And with automatic distributions, you can make these contributions painlessly, without thinking about them.
IRAs at a glance
- Annual contribution limits are $5,000 for Roth and Traditional IRAs, $2,000 for Coverdell ESA accounts.
- “Catch-up” contributions for people age 50 and better offer an additional $1000 on the maximum Roth and Traditional IRA limits.
- Makes it easier to consolidate assets in IRAs and employer-sponsored plans.
- Offers a tax credit to low-and-middle-income people who make IRA contributions.
Check with your CPA or tax advisor as to which IRA account best suits your needs and personal situation.
*IRA Share Certificates subject to penalties upon early withdrawal. Please see Ohio HealthCare FCU Truth in Savings Disclosure for details.