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IRAs

An IRA is an investment account that belongs to you, to which you contribute. It can consist of stocks, mutual funds, bonds, annuities, certificates or other investment products. Gains grow tax deferred until they’re distributed. In some cases, they’re not taxed at all. Explore the features of both a Roth and Traditional IRA to see if an IRA is right for you. There is also an IRA calculator available to help you determine which type of IRA contribution is appropriate for you given your personal financial information, rate of return and years until retirement.

 

Traditional

Potentially reduce the taxes you owe today and grow your money tax-deferred
 
Meet the eligibility requirements and you can deduct contributions to a traditional IRA from your federal taxable income, as well as from your taxable income in most states. This up-front tax break reduces the current income taxes you owe. Also, money in a traditional IRA accumulates tax deferred. You’ll eventually have to pay taxes, but not until you make a withdrawal.
  • You can contribute to your IRA any time during the year or by the due date for filing your tax return – always April 15 – extensions do not apply.
  • If you make early withdrawals before age 59 1/2, you’ll owe a 10% tax penalty on the taxable portion of the distributions. You’ll also owe income tax on your earnings and on any deductible contributions you made.
  • There are exceptions to the early withdrawal penalties: you have unreimbursed medical expenses exceeding 7.5% of your adjusted gross income, have health insurance premiums due to unemployment, are permanently disabled, have qualified higher education expenses, are a first-time homebuyer (lifetime limit of $10,000), or are the beneficiary of a deceased IRA owner.
  • By April 1 of the year following the year in which you reach age 72, you must either withdraw your entire balance or start taking required minimum distributions each year.

A Financial Professional located at your credit union will show you how to get started on your IRA.

 

Roth

Earnings grow tax-deferred, withdraw at retirement tax-free
 
Roth IRA earnings grow tax-deferred, and for qualified distributions, your earnings can also be withdrawn tax-free. But there are rules, and they can be complex:
  • Roth IRA contribution limits vary by tax year, income level and tax filing status (single, married filing jointly), so you may want to work closely with a financial professional.
  • You can contribute to your IRA any time during the year or by the due date for filing your tax return – always April 15 – extensions do not apply.
  • If you need to dip into your nest egg early, Roth rules differ and can be complex. Unlike a traditional IRA, you can withdraw up to the total amount of your annual contributions at any time, for any reason, with no federal taxes or penalties due.
  • Another advantage Roth IRAs have over traditional IRAs is there are no required minimum distributions during an owner’s lifetime. Minimum distribution rules, however, do apply after the death of the owner.
The best place to start is with a Financial Professional located at your credit union. They can even show you how to convert your Traditional IRA to a Roth IRA, but it will be treated as a distribution and you’ll owe some taxes.
 

Rollover

Your existing retirement funds follow you penalty-free
 
When you close or take money out of a retirement account before the IRA guidelines allow it, you typically have to pay the ordinary income tax on it, plus an early withdrawal penalty. But there’s a simple way to transfer the money into another qualified plan. And it doesn’t trigger any taxes or penalties at all.
  • A “direct rollover” moves an employer retirement plan like a 401(k) or 403(b) plan directly into another IRA.
  • A “trustee-to-trustee transfer” is a direct rollover where your IRA savings are rolled into another IRA with a new trustee.
  • With an “indirect rollover,” you receive a distribution from the IRA or tax-deferred plan and then roll it into another IRA. You must do this within 60 days. After that date, taxes will be due and depending on your age, an additional 10% tax penalty may be assessed.
    • Indirect rollovers can force withholding. If your money is in an employer retirement plan, your employer is typically required to deduct 20% withholding. You recover it by rolling over 100% of your distribution and adding the 20% back in yourself.
A Financial Professional located at your credit union can help show you how to get started.

 

Inherited

What happens if your IRA outlives you?
 
Your IRA assets pass to your beneficiaries, the individuals you’ve named to receive them. When they do, they receive an “Inherited IRA.”
  • Rules for inherited IRAs vary depending on the type of beneficiary you name.
  • Spouse beneficiaries have options for an inherited IRA that aren't available to other types of beneficiaries.
  • Most non-spouse beneficiaries will need to liquidate an inherited IRA within a 10-year period.
  • Some beneficiaries, known as Eligible Designated Beneficiaries, can stretch distributions over their own lifetime. 

Work with a Financial Professional located at your credit union can help you learn more.

 

The financial professionals at Envista Investment Advisors are registered representatives with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Envista Credit Union and Envista Investment Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Envista Investment Advisors, and may also be employees of Envista Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Envista Credit Union or Envista Investment Advisors. Securities and insurance offered through LPL or its affiliates are:
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