Traditional IRA Accounts

Both Traditional IRAs and Roth IRAs let you make a certain amount of contributions each year based on your age and your total household income. The maximum contributions for both accounts is $6,500 if you’re under 50 and $7,500 if you’re over 50.

The main difference between the two accounts is how you want to handle the taxes:

• A Traditional IRA allows tax deductions on some or all of your contributions, depending on your income. This means your deposits and earnings can grow tax-free, and then you pay regular income tax on your withdrawals.
• A Roth IRA doesn’t allow tax deductions on your contributions because you make the contributions from post-tax earned income. Your future withdrawals are tax-free as long as you’re over 59½.
• There is also a difference when it comes to early withdrawals:
• With a Traditional IRA, you need to pay a 10% tax for early withdrawals before age 59½ unless you meet the exception criteria.
• Roth IRAs may have different withdrawal restrictions (or none) depending on the type of account you open (Retirement Statement Savings account, IRA Money Market account, IRA CD.
• If you meet certain criteria, you can likely withdraw your contributions without penalty but may need to pay taxes and penalties on your earnings.

Another key difference is that, beginning at age 73, a Traditional IRA has Required Minimum Distributions (RMD) but a Roth IRA doesn’t require you to withdraw any particular amount at any time.

It’s a good idea to talk to a retirement specialist if you’re not sure about your best path forward. You can decide which IRA is best for you based on your ideas about your current and future income.

• If you need as much income as possible right now and you’re confident about your future income, you might benefit from the tax advantages of a Traditional IRA.
• If you would prefer to contribute post-tax income now so you don’t have to worry about taxes in the future, you might prefer a Roth IRA.

With a Traditional IRA, you generally need to pay a 10% penalty tax on early withdrawals unless you meet one of the following criteria:

• You use the funds (up to $10,000) to pay for a first-time home purchase.
• You use the funds to pay for qualified education expenses.
• You use the funds for qualified expenses related to a birth or adoption.
• You use the funds to pay for health insurance if you’re unemployed or unreimbursed medical expenses.
• You become disabled or pass away.

In contrast, a Roth IRA may let you make penalty-free withdrawals of contributions once the account has been open for five years or met other criteria specific to the account. But there may be a penalty for early withdrawal of earnings unless you meet the above criteria.

Beginning with the year you turn 73, you must take Required Minimum Distributions (RMDs) each year. The Credit Union will calculate your RMD for each year by dividing your IRA account balance (as of December 31 of the prior year) by the applicable distribution period or life expectancy.

You will need to check the exact terms of any workplace or employer-sponsored retirement plan. In many cases, you can open an IRA in addition to your other plan but your contributions may be restricted. You may also be able to combine your retirement accounts in a process known as a Rollover.

There are two ways to move your IRA funds:

• A Trustee Transfer which is done between financial institutions, with the paperwork being initiated by the receiving financial institution. This is not a reportable transaction to the IRS.
• A Rollover is initiated when an individual makes a withdrawal by check from one IRA and deposits the funds into another IRA elsewhere within the 60 calendar day time limit.
• The IRS imposes a restriction of one rollover per individual per 365 days. This is a reportable transaction to the IRS and must be indicated on your tax return for the year in which the Rollover is processed. We can assist you with these transactions.

The best way to move funds from a former employer-sponsored retirement plan (i.e., 401(k), Profit Sharing, 457 Plan, etc.) to an IRA is by a Direct Rollover. A Direct Rollover is the direct payment of your vested interest in an employer-sponsored retirement plan to an IRA Trustee or Custodian for your benefit.

You must initiate the rollover through the company that is handling your retirement plan. We can assist you in completing any documentation that is required by your former employer to initiate the process. Upon payout, you will receive a check from the employer plan manager that is made payable to “Jeanne D’Arc Credit Union FBO (for the benefit of) your name”.

The check may either be mailed directly to Jeanne D’Arc Credit Union or to you. If the check is mailed to you, it is your responsibility to make sure the check is delivered to Jeanne D’Arc Credit Union within the 60 day time limit.

No, there is no minimum age requirement to open an IRA account.

No. Unlike many financial institutions, Jeanne D’Arc does not charge annual maintenance fees for IRAs.

There are three deposit options for IRAs:

• A Retirement Statement Savings account (with a variable rate of interest)
• An IRA Money Market account (with a variable rate of interest)
• An IRA CD (fixed rate with terms ranging from 6 to 60 months)