What is an IRA?

A traditional Individual Retirement Account (IRA) is a special savings plan authorized by the Federal government to help you accumulate funds for your retirement.

You may be able to establish and contribute to a nondeductible tax-free individual retirement arrangement (a plan) called the Roth IRA. Unlike certain contributions to a traditional IRA, you cannot claim a deduction for any contributions to a Roth IRA. But, if you satisfy the requirements, all earnings are tax free and neither your nondeductible contributions nor any earnings on them are taxable when you withdraw them.

Who is Eligible to Contribute to an IRA?

Every individual who has earned income or received alimony may contribute to a traditional or Roth IRA. Income fom other sources, such as investments or inheritences, does not qualify. Contributions may not be made, to a traditional IRA, for or after the year in which you rach age 70 1/2. You may contribute to a Roth IRA, regardless of your age, as long as you are working.

I am an Active Participant in an Employer-Sponsored Retirement Plan. May I Deduct IRA Contributions? ¹

If you or your spouse are active participants in an employer-sponsored retirement plan, your IRA contribution deduction will depend on your level of adjusted gross income.

If you or your spouse are not active participants in an employer-sponsored retirement plan, you can deduct 100% of your IRA contribution regardless of income level.

A contribution to a ROTH IRA is never tax-deductible and limits may be reduced due to income level.

Are IRA Earnings, Such as Interest and Dividends, Tax-Deferred?

Taxpayers with pension plans and incomes above those levels cannot claim an IRA deduction; however, they can continue to put money into an IRA, and the earnings in the account would accumulate tax-deferred until withdrawn.

How Much Can I Contribute to an IRA?

Each year you can contribute all or part of your compensation, as follows:

• Individual Taxpayer - $5,000 for a single taxpayer.
  
  
• Married Taxpayer - $10,000 for married taxpayers where both spouses have earned income (each spouse can contribute up to $5,000 each)
  
  
• Spousal IRA - $10,000 for married taxpayers filing jointly. (Yearly contributions may be unequally divided between the accounts, provided the total contribution does not exceed the working spouses annual earned income and neither account is allocated more than $5,000. Unemployed spouses may contribute up to $5,000 even if the working spouse does not make a contribution).
  
  This applies to a Roth IRA as well as a traditional IRA - Taxpayers 50 and over may contribute an additional $1000.
  
  

Must I Contribute the Full Amount Each Year?

No. You can contribute any amount your budget allows, in one or many contributions. In fact, if you choose, you need not make any contribution in a given year.

When Can I Make Withdrawals?

Withdrawals (distributions) from a traditional IRA are permitted any time after age 59 1/2 but must start by April 1st following the year in which the participant reaches the age 70 1/2. After age 59 1/2, you may make withdrawals even if you continue to earn income. It is not necessary to be retired to make withdrawals.

For a Roth IRA, you are never required to take a distribution, regardless of your age. A distribution that qualifies as non-taxable from a Roth IRA must generally be made on or after the date you reach 59 1/2, made because you are disabled, made to a beneficiary or to your estate after your death AND have been on deposit for 5 years.

Can I Make Earlier Withdrawals?

Yes. However, there is a penalty for withdrawing all or any part of the account before age 59 1/2, except for higher education, first time home purchase or in the event of death or total disability, medical expenses exceeding 7.5% of adjusted gross income, or for medical insurance premiums in certain unemployment situations. You must include the amount withdrawn as ordinary income for the year of receipt, and in addition, you must pay a Federal tax penalty. It is also possible that certificate penalties may apply.

What is the Deadline for Contributing to an IRA?

You can open or make contributions to your IRA any time up to the due date of your tax return for the previous tax year, normally April 15.

**NOTE: The Credit Union reserves the right to change or terminate any of these offerings without notice. Penalty may be imposed for early withdrawal.

Should I Make One IRA Deposit in January, Or Should I Spread My IRA Deposits Over the Year?

Each member must decide which is best. However, dividends paid on IRA's are nontaxable and if you make your total $5,000 IRA deposit in January, the earnings from it will be tax-exempt for the entire year.

NOTE: Incremental deposits to existing certificates are available only on 91-day or 42-month variable rate certificates.

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Our specially trained staff will answer your specific questions not covered here and will explain various options that are available to you.

Self-Directed IRA*

An Exciting Opportunity for Retirement Fund Growth

Broaden your retirement opportunities with a Self-Directed IRA Account and put the market to work for you. Owning a Self-Directed IRA doesn't mean you must terminate your IRA at the Credit Union or at other financial institutions. The IRS allows you to have more than one IRA. By adding a Self-Directed IRA, you will complement your other IRA's giving you the flexibility to self direct your retirement funds. Your Credit Union through Visions Investment Services or through Discount Brokerage Services, offers the option of investing in a Self-Directed IRA. If you are interested in how you can save for a more comfortable retirement, you may want to read the information that follows concerning a Self-Directed IRA.

Why Have a Self-Directed IRA?*

As an IRA account increases in size, a simple deposit instrument may not be as competitive as other investments, depending on money-market rates. Also, a Self-Directed IRA may offer greater yield opportunities, as well as the flexibility to move retirement funds among various investment alternatives, to meet changing goals and market conditions.

Who Should Have a Self-Directed IRA?*

A Self-Directed IRA isn't for everyone. It may require some investment knowledge and experience or the assistance of a qualified financial advisor. Individuals who seek portfolio diversification, greater yield opportunities, and freedom of choice from a wide range of investment opportunities would benefit most from a Self-Directed IRA.

What Type of Investments Are Available?*

Just as every fund has a specific investment goal, each individual has varying objectives. In a Self-Directed IRA, you can choose among a variety of investments. With a Self-Directed IRA you can invest in mutual funds, that offer diversity, professional management, liquidity and convenience. To further widen your investment opportunities, you can purchase limited partnerships, money-market funds, zero coupon bonds, flexible premium annuities, precious metals, and a number of other investments. A licensed representative is available to help you learn about these different investment options. You may also purchase individual stocks listed on NYSE, AMEX and over-the-counter stock exchanges through Discount Brokerage Services.

IRA Tax Savings for People Not Covered By Employer-Sponsored Retirement Plans

Based on 2007 IRS Federal Tax Tables

IRA Growth Chart

Interest earned assumes money deposited for the entire year at an annual percentage yield of 4.00%, and does not include additional interest earned by compounding. Interest earned and accumulated funds are approximations, and subject to change over long periods of time. Substantial penalties for early withdrawal.

*Visions Federal Credit Union is not a registered/broker dealer. Investment and brokerage services are provided through arrangement with a registered/broker dealer. Not NCUA insured. Not Credit Union guaranteed. May lose value.