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IRA FAQs
Generally, if you have taxable compensation from a job or alimony, you can open an IRA.
Traditional IRA: Contributions are fully tax-deductible if you or your spouse do not participate in an employer-sponsored retirement plan. Beginning in the calendar year in which you reach age 70 ½, you can no longer make contributions to a Traditional IRA.
Roth IRA: you may open an account at any time provided you have taxable income.
Yes, a savings account allows you access to all the credit union’s products and services, including other types of accounts.
You may have a Traditional IRA even if you are covered by a qualified pension, profit-sharing or other retirement plans, but you may be limited in the amount of the contributions that are tax-deductible. (To be “covered” means that money is contributed to your account, whether or not you contribute yourself.) For limitations on deductibility, see IRS Publication 590 available at www.irs.gov.
The purpose of an IRA is to save for retirement, so both traditional and roth IRA accounts are designed to discourage prematurely withdrawing funds before turning 59 ½. The IRS imposes a 10% penalty on top of any taxes you pay on the withdrawal. There are some exceptions that allow early withdrawal without penalties.
You can open an IRA or contribute to an existing IRA, at any time. IN order to apply to a given tax year, contributions may be made from January 1st of that year up to the tax filing day of the following year. The tax filing day is the normal tax deadline, even if you have received an extension beyond that date for filing our tax return.
Most people can currently contribute up to $6,500 or 100% of your taxable compensation for the year, whichever is less. The $6,500 limit applies to total contributions to all IRA’s in the person’s name (Traditional and Roth). Please be aware that there are certain modified adjusted gross income (AGI) ranges. The exact amount of partial deductions can be calculated by using a worksheet in IRS Publication 590 available at www. Irs.gov.
If you reach age 50 before or during the year, you are permitted to play “catch-up” with your retirement savings by contributing up to $7,500 (an extra $1,000). The “catch-up” provisions apply to anyone who meets the age requirement and is otherwise eligible to contribute to an IRA.
If both of you have earned income, you can establish separate Traditional IRAs and can each contribute up to $6,500 or $7,500 if you reach age 50 before or during the year. If your combined income is less than your combined limits, the combined IRA contributions are limited to 100% of your taxable compensation.
If one spouse has little or no earned income, a Traditional IRA can be established based on the income of the higher-earning spouse. In this case, the combined total contribution may be up to $13,000 or $15,000 if each of you reaches age 50 before or during the year. The total may be divided between the two accounts in any way desired, so long as neither account receives more than $6,500 (for normal contribution) or $7,500 (for “catch-up” contribution). If your combined income is less than your combined limits, the combined IRA contributions are limited to 100% of your taxable compensation.
Provided that you have taxable compensation, contributions within the allowable limit are fully tax-deductible if the person or spouse is not covered by a retirement plan at work. If you participate in an employer’s qualified retirement plan on any day during the tax year, the deductibility of your contributions declines to zero between certain modified adjusted gross income (AGI) ranges. The exact amount of partial deductions can be calculated by using a worksheet in IRS Publication 590, “Individual Retirement Arrangements (IRAs)” available at www.irs.gov.
If you (and your spouse, if you are married) do not participate in a corporate, government, Keogh, or other retirement plan, then your Traditional IRA contribution is generally fully tax deductible, whatever your income level.
Roth IRA contributions are not tax deductible.
You can transfer a Traditional or Roth IRA directly from one mutual fund company to another. To directly transfer an IRA from another company to METRO Federal Credit Union, please contact us for an IRA Transfer Form.
Examples of a rollover are moving assets from a Traditional IRA or an employer-sponsored retirement plan account, such as a 401(k) or 403(b) plan, into a Traditional IRA, or from a Roth IRA into another Roth IRA. You cannot roll over money from a 401(k) or 403 (b) plan into a Roth IRA, but you may convert your rollover IRA into a Roth IRA if you are eligible to do so.
Effective January 1, 2015, the IRS imposed the new IRA Rollover rule which stipulates that an IRA owner may complete only one IRA-to-IRA rollover per 365 days, regardless of how many IRAs you own, without differentiating between Traditional, Roth and SEP IRAs. This change will only affect rollovers, and will not have any impact on trustee-to-trustee transfers and does not apply to the direct rollover of 401(k) funds to a Traditional IRA.
For more information, including rollover contribution time limits, see IRS Publication 590 available at www.irs.gov.
You must begin to make an annual withdrawal once you turn 73 years old. This is called a required minimum distribution (RMD). RMD guidelines are set by the IRS to ensure that account holders pay taxes on their previously tax deferred deposits. These distributions are based on the IRA balance divided by the applicable distribution period. Because IRAs were created to provide income during retirement—not to be a tax shelter— IRA owners failing to take their RMDs are subject to a 50 percent excess accumulation penalty tax on the assets that should have been distributed but were not. To calculate your RMD, please visit irs.gov or contact a Member Service Representative at 847-670-0456, ext 1, for assistance.
Yes, however there are specific rules and forms to ensure that your IRA funds are dispersed as intended. To update your IRA beneficiary, please contact us for a new IRA Simplifier Form.
*Tax law is complex and has many general rules, details and exceptions, and state and local tax law varies from federal tax law. To learn about federal tax law and rules, details and exceptions concerning IRAs, you should read IRS Publication 590 “Individual Retirement Arrangements (IRAs)” available at www.irs.gov or by calling the IRS at 1-800-TAX-FORM (1-800-582-6757). If you have questions and for tax advice, you should consult a financial or tax advisor before acting. Please consult a tax advisor for specific individualized tax or legal advice.
