Individual Retirement Account (IRA)

 

Individual Retirement Accounts (IRA) - A Safe and Easy Path to a Secure Future

The most common types of IRA's are accounts that you open on your own such as Traditional IRAs or Roth IRAs. See which one is right for you!

  Traditional IRA Roth IRA
Who Can Contribute:

Anyone younger than age 70 1/2 with earned income.

Anyone of any age who meets income requirements 1

Maximum Annual Contribution

(as of 2015)

$5,500

$6,500 if age 50 and over

$5,500

$6,500 if age 50 and over

Funds accepted from other plans: Yes, from pension, profit sharing, 401(k), 403(b) and 457 plans. Other traditional IRAs can be rolled over or transfered. Yes, from traditional, SEP and SIMPLE IRAs as a conversion, qualified retirement plans as a qualified rollerover contributions, Roth IRA transfers, or ROTH 403(b) and Roth 401k roller overs.

Tax considerations:

Contributions
Contributions may be tax-deductible, within certain limits, and  have tax-deferred growth potential. Contributions are not tax-deductible, but have tax-deferred growth potential.

Tax considerations:

Withdrawals
Earnings and tax-deductible contributions are taxed when withdrawn. Qualified withdrawals of earnings are income tax-free.
Required distributions: 70½ None during owner's lifetime.
Early access: Yes; qualified distributions may be penalty tax free. Yes; qualified distributions may be both income tax and penalty tax free.
May be a good choice if: You want to reduce your current income tax burden in exchange for paying taxes when you take distributions. You prefer to forgo the tax benefits now in exchange for tax-free income in retirement.

1 Must earn a modified adjusted gross income (MAGI) of < $129,000 for 2014/< $131,000 for 2015 (single), or < $191,000 for 2014/< $193,000 for 2015 (joint). If you are a married taxpayer who files separately, consult your tax advisor

There are other types of IRAS which can be opened by self-employed individuals and small business owners, these include SEP IRAs and Simple IRAs.

A SEP IRA is a type of traditional IRA for self-employed individuals or small business owners. (SEP stands for Simplified Employee Pension.) Any business owner with one or more employees, or anyone with freelance income, can open a SEP IRA. Contributions, which are tax-deductible for the business or individual, go into a traditional IRA held in the employee's name. Employees of the business cannot contribute - the employer does. Like a traditional IRA, the money in a SEP IRA is not taxable until withdrawal.

A SIMPLE IRA, or Savings Incentive Match Plan for Employees, is a type of traditional IRA for small businesses and self-employed individuals. As with most traditional IRAs, your contributions are tax deductible, and your investments grow tax deferred until you are ready to make withdrawals in retirement.

Take the Next Step

A FNB Fox Valley personal banker can help you identify which IRA is the best option for you. You can also take a look at the resources below to help you when it comes to investing with an IRA:

Ready to learn how an IRA might support your retirement strategy? Contact a FNB Fox Valley personal banker, call 920.729.6900 or email to get started today.  

FNB Fox Valley employees cannot provide legal, accounting, or tax advice services. Work with your FNB representative, and as appropriate, your attorney and/or tax professional for additional information.