For long term savings, we encourage you to set up an Individual Retirement Account (IRA). It’s the best way to guarantee a worry-free retirement and contributions may be tax deductible. A Individual Retirement Account is a special savings plan authorized by the Federal Government to help you accumulate funds for your retirement.
The Roth IRA offers tax-deferred growth and tax-free withdrawal of the participant’s money if the account is at least five years old and the participant is 59½ years old.
Roth IRA Eligibility
- The participant must have earned income or received alimony
- There is no age limit for contributions
- The 2016 annual contribution limit is $5,500 per taxpayer
- The 2017 annual contribution limit is $5,500 per taxpayer
- The 2016 catch-up contribution limit is $6,500 per taxpayer
- The 2017 catch-up contribution limit is $6,500 per taxpayer
Spousal – Married Filing Jointly
- The 2016 contribution limit is $11,000 per taxpayer
- The 2017 contribution limit is $11,000 per taxpayer
Points of Interest
- Distributions are never mandatory
- Contributions to a Roth IRA may not be deducted from income tax
- If the participant is 59½, withdrawal of contributions (not earnings) can begin at any time without tax or penalties
- If the participant is 59½, and the Roth IRA is at least five years old, up to $10,000 of earnings can be withdrawn tax-free if it is to be used for a first-time home purchase
- If the participant is 59½, and the Roth IRA is at least five years old, earnings may be withdrawn without penalty if the money is to be used for qualified education costs. The earnings cannot exceed the education costs, otherwise income tax will need to be paid on the earnings.
All in all, the Roth IRA is a very liquid vehicle for investors as long as the account is at least five years old. Ideally, of course, you will want to have your contributions grow undisturbed for a financially sound retirement.
Click here to read the 2016-2017 edition of the IRA Newsletter for valuable information.
Retirement calculators will help project your long-term IRA balances.
Your funds are insured separately up to $250,000 by the NCUA.
For information regarding Traditional IRAs, click here.
For information regarding Coverdell IRAs (Educational), click here.