Retirement Accounts

Individual Retirement Account (IRA) 
SharePlus Federal Bank Individual Retirement Accounts (IRAs) offer a safe home and a high yield for your retirement savings, the purchase of a first home or a child's education. We offer competitive rates on Traditional IRAs, Roth IRAs and Coverdell Education Savings Accounts. Use our Planner Calculators to assist you with your retirement and savings decisions. Please consult with a tax advisor to find the best option for you.

The Economic Growth and Tax Relief Reconciliation Act of 2001 provides incentives for saving and enhancements to IRAs, which include:

• Increased annual IRA contribution limits
• In 2009, and 2010 the limit you may contribute is $5,000.
• If you have attained age 50 or older by the end of the year, you can contribute an extra $1,000, for a $6,000 total contribution limit.  
• Nonrefundable tax credit available for certain individuals
• You may be eligible to receive a credit on your contribution if you meet certain income requirements
• Increased portability for your retirement savings
• Untaxed Traditional IRA assets are now generally permitted to be rolled over into a qualified retirement plan (employer plan) or Roth IRA

Please consult with your tax professional to help determine which of the following plans works best for you, start saving today and enjoy the benefits in retirement:

• Traditional IRAs offer the benefit of tax deferral while new laws offer expanded eligibility
• Roth IRAs allow contributions past the age of 70 1/2 and offer the benefit of tax-free earnings if held for five years and the account owner is over 59½.
• Coverdell Education Savings Account (ESA), formerly known as an Education IRA, is an ideal way for you to begin saving money to help a child, grandchild, or any young person pay for education expenses.

SharePlus offers IRA Savings Accounts and IRA CD terms ranging from 9 months to 60 months. Click here to see current yields on IRA CD's. Visit your local branch or call 1-800-352-8257 to open an IRA today.

Click here to view IRA Questions and Answers to help you select the IRA that's best for you.

A Traditional IRA is a special savings plan that offers tax advantages for individuals to make tax-deductible contributions and set aside money for retirement. The earnings grow tax-deferred until withdrawn which helps maximize your retirement nest egg.  Funds may be withdrawn from your IRA without penalty any time after you reach age 59 ½.  Funds withdrawn before 59 ½ may be subject to a 10% premature-distribution penalty.  The taxable portion of amounts withdrawn must be reported as income on your tax return.  When you reach age 70 ½, you must begin to take required minimum distributions to avoid tax penalties.

Traditional IRA profile: 

• Contributions may be tax deductible.  Your tax professional can help determine IRA deductibility.
• Withdrawals may begin at age 59 1/2 and are mandatory by 70 ½
• Funds grow tax deferred until withdrawn from the IRA
• SharePlus IRA CD terms range from 9 to 60 months. Click here to see current yields on IRAs and other savings instruments.
• Available to anyone that has compensation and is younger than 70 ½ for the entire year
• All funds withdrawn (including principal contributions) before age 59 1/2 are subject to a 10% penalty (subject to exception). See a tax professional for more information.

For more specific information about a Traditional IRA, please visit IRA.com or a similar online resource.

A Roth IRA allows customers who do not exceed a specific income level to contribute a limited amount of money toward retirement annually. Unlike a Traditional IRA, the contributions to a Roth IRA are not tax deductible. However, withdrawals are tax-free if the account has been open for at least five years and you're at least 59½ when you start to withdraw money. Roth IRAs have no mandatory distribution age.

Starting in 2010, Modified Adjusted Gross Income (MAGI) limits have been lifted so taxpayers with earned income above $100,000 will be allowed to convert a traditional IRA to a Roth IRA. 

 

Removing the Roth IRA conversion MAGI cap does not allow everyone to fund a Roth IRA, but it does allow anyone to convert an existing IRA to a Roth IRA.

 

Regardless of income or filing status, you can now roll over the following to a Roth IRA:

·         Traditional IRA (SEP IRA or SIMPLE IRA)

·         Eligible Rollover Distributions (ERD) from your 401(k) or 403(b)

·        Eligible Rollover Distributions from a retirement plan for which you are a beneficiary to a Roth IRA.  

 

Income Requirements to Convert to a Roth IRA

	Current Requirements	2010 Requirements
Modified Adjusted Gross Income Limit for Single	$100,000 or less	No Limit
Modified Adjusted Gross Income Limit for Married	$100,000 or less	No Limit
Conversion Deadline	December 31	December 31

 

If you do decide to take advantage of the Roth conversion rule in 2010, keep in mind that conversions from non-Roth accounts to Roth IRAs generally are taxable for the year in which the conversions are made.

 

For the year 2010 only – if you convert an existing retirement account to a Roth IRA, you can split the converted income amount between 2011 and 2012, which means that you would not pay any taxes in 2010 on the amount converted.

 

Consult with your tax professional to understand possible tax implications.

For more specific information about a Roth IRA, please visit RothIRA.com or a similar online resource.

Roth IRA profile: 

• Contributions are not tax deductible
• No Mandatory Distribution Age
• All earnings and principal withdrawals are 100% tax free if rules and regulations are followed
• SharePlus IRA CD terms range from 9 to 60 months. Click here to see current yields on IRAs and other savings instruments.

·         In 2009 and 2010, the adjusted gross income limits are:

Ø       Single filers, Head of Household or Married Filing Separately (and you did not live with your spouse during the year) with modified adjusted gross income up to $105,000 can make a full contribution.  Contributions are phased-out starting at $105,000 and you cannot make a contribution if your adjusted gross income is in excess of $120,000.

Ø       Joint filers with modified adjusted gross income up to $166,000 ($167,000 in 2010) can make a full contribution.  Once again, this contribution is phased-out starting at $166,000 ($167,000 in 2010) and you cannot make a contribution if your adjusted gross income is in excess of $176,000 or $177,000 in 2010.

Ø       If your tax filing status is Married Filing Separately (and you live with your spouse) you cannot make a Roth IRA contribution if your AGI is in excess of $10,000.

 

•  Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions. See a tax professional for complete information.)

Coverdell Education Savings Account (ESA)

Formerly called an Education IRA -- Customers can make annual contributions of up to $2,000 per child into an account that's exclusively for helping to pay higher education costs. The money contributed to a Coverdell account doesn't count against the $5,000 ($6,000 if 50 and older) annual total individuals may contribute to their combined individual IRAs. The earnings and withdrawals from a Coverdell account are tax-free, but you can't deduct the contributions from your income tax.

Coverdell Education Savings Account profile: 

• Major increase in the allowable annual contribution limit. The limit increased from $500 to $2,000 per child beginning January 1, 2002
• Increase to the adjusted gross income limit for married joint filers. Any married taxpayer filing jointly with income under $190,000 can contribute the maximum $2,000 per year per child
• K-12 school costs have been added to the list of qualified expenses. This includes home computer equipment, Internet access and tutoring
• Waiver of age limitations for children with special needs. The law allows contributions for individuals with special needs beyond age 18 and no mandatory pay-out at age 30
• Contribution deadline extended to April 15th

For more information about a Coverdell Education Savings Account please visit SavingForCollege.com or a similar online resource.

IRA QUESTIONS AND ANSWERS

Q. What is an IRA? 
A. An IRA is a retirement account with tax advantages. Individuals may contribute up to $5,000 ($6,000 if 50 or older) annually to an IRA as long as they have earned $5,000 in that year (i.e. you can't pad it with unearned money). The investment grows tax-free until it's withdrawn, usually after age 59½. Money withdrawn before age 59½ will usually get hit with a 10 percent penalty, but there are some exceptions.

Q. How does an IRA work? 
A. You invest money in an IRA, up to the amount allowable under the tax law (see Contribution Limits below). These investments are termed "contributions." For many people an income tax deduction is available for the tax year for which the funds are contributed. The contributions, as well as the earnings and gains from these contributions, accumulate tax-free until you withdraw the money from the account. You, therefore, enjoy the ability to generate additional earnings, unreduced by taxes on these earnings, each year the funds remain within the IRA.
The withdrawals of the funds from the IRA are termed "distributions." Distributions from a traditional IRA are subject to income taxation, generally in the year in which you receive them.

Since the purpose of the IRA is to assist you in providing for your own retirement, there will probably be a substantial “penalty” for withdrawing your IRA funds prior to age of 59 ½. You should consult with a tax professional before taking a distribution prior to age 59 ½. Distributions from a traditional IRA, whether taken before age 59 1/2 or later, are subject to income taxation upon receipt. Once you are age 59 1/2 this penalty, termed a "Premature Distribution" penalty, is no longer applicable.

Q. Who is eligible to open an IRA? 
A. Any individual can open and make contributions to a traditional IRA, as long as you, or your spouse (if you file a joint return), received taxable earned compensation during the year and you were not 70 ½ years old by the end of the year.

Q. What are the new contribution limits for IRAs, 401(k)s, and other retirement plans? 
A. The Economic Growth and Tax Relief Reconciliation Act of 2001 enacted a number of changes to the rules regarding IRAs, 401(k)s, 403(b)s, and other retirement plans. The Act does not apply to tax years after 2010.

• Traditional and Roth IRA Contribution Limits Contribution limits for Traditional and Roth IRAs are currently $5,000 for year 2009 and 2010. After 2010, the limit may be adjusted annually for inflation.
• 401(k), 403(b) and 457 Plans
  These limits are on pretax contributions to certain employer- sponsored retirement plans. Remember that employers have the option of imposing lower limits than the government maximums, which will was set at $15,000 in 2006.
  • 2007-2010 - Indexed to Inflation
• Catch-Up Contributions
  "Catch-up" contributions are for people aged 50 and over. To be eligible for a catch-up contribution, an individual must first make the maximum regular contribution to his or her IRA or employer-sponsored plan.
  • 2006-2010 - $1000 per year

Catch-up contributions to Traditional IRAs may be tax deductible if the taxpayer meets certain income restrictions.

Q. How much of my IRA contribution is tax-deductible? 
A. It depends. First, remember that contributions to a Roth IRA are not tax-deductible. For a Traditional IRA, it depends mostly on the amount of taxable compensation you earned in that tax year and whether or not you, or your spouse is married, are an active participant in a qualified plan. Assuming you, or you and your spouse jointly, earned more in taxable compensation than the maximum deductible amount for your IRA contributions, and neither of you are active participants in a qualified plan, you should be eligible to deduct the full amount of your contribution up to the maximum deductible amount.

If you or your spouse is an active participant in a qualified or employer-sponsored plan, then the amount of your contribution that is tax-deductible will be reduced depending on your AGI (adjusted gross income). See a tax professional for additional information.

Q. I am leaving a company and taking my 401K proceeds. How much time do I have to deposit them in an IRA before they are taxed as income? 
A. You have 60 days to roll over your distribution if the money was given to you. The best way to do this is to have the company administrator write a check to the IRA ROLLOVER account directly, this makes sure that nothing is withheld in taxes, and is much cleaner. Keep in mind that you can do only one rollover per year, but there is no limit on the number of trustee-to-trustee transfers in a year.  Eligible assets from an employer plan may also be rolled over or directly rolled over to a Roth IRA. 

Q. Can I have multiple IRA accounts at different institutions? 
A. Yes. However, you cannot contribute more than the maximum allowable amount each year ($5,000 for the 2009 and 2010 tax year or $6,000 if you are over the age of 50) regardless of the number of separate IRAs you have.

Q. Which IRA is best for me – a traditional IRA or a Roth IRA?
A. The answer depends on your financial situation now and what you expect it to be in the future. For example, if you're a participant in an employer-sponsored retirement plan and you have a relatively high income (up to certain limits), a Roth IRA is likely the appropriate choice because a contribution to a traditional IRA wouldn't be deductible on your tax return. If you exceed the income limits for a Roth IRA, the only choice you'll have is to make after-tax contributions to a traditional IRA—which still allows your investments to grow tax-deferred.

When deciding on a type of IRA, it also helps to think about how your tax situation might change following retirement. If you expect to be in a lower income tax bracket when you retire, a traditional IRA may be more suitable. Why? Because contributions may be tax-deductible now (depending on your income), and you'll probably pay taxes at a lower rate when you make withdrawals.

Visit with your SharePlus branch manager or call the Customer Service Center at 1-800-35BUCKS for more information.

IRA GLOSSARY AND DEFINITIONS

AGI (Adjusted Gross Income) -- Used to calculate federal income tax, AGI includes all the income you received over the course of the year such as wages, interest, dividends and capital gains minus things such as business expenses, contributions to a qualified IRA, moving expenses, alimony and capital losses.

Contribution -- IRA contributions are limited to $5,000 a year for those younger than 50 and $6,000 a year for those 50 and older. Contributions are classified as either tax deductible or nondeductible.

Deductible/nondeductible -- Contributions to a traditional IRA are tax deductible if you are not covered by your employer's retirement plan. Even if you do participate in a company pension or 401(k) plan, you still may be able to deduct contributions to a traditional IRA depending upon your income and filing status. Contributions to a Roth IRA are not deductible.

MAGI (Modified Adjusted Gross Income) -- For the purpose of determining your contribution limit some people use their AGI increased by certain exclusions from your income. Examples of exclusions to income include foreign-earned income and housing costs of U.S. citizens or residents living abroad and income from sources within Puerto Rico, Guam or American Samoa.

Required minimum distribution -- Generally, a traditional IRA owner must begin taking money out of the account by April 1 of the year after he or she turns 70½. The amount is a minimum distribution determined by the account holder's age and life expectancy. The IRS has established simplified tables that a traditional IRA owner can use to figure the required distribution. If required payments are not made on time, the IRS will collect an excise tax. Roth IRAs aren't subject to minimum distribution requirements until after the Roth owner dies.

Rollover -- This is the term used when transferring assets from one tax-deferred retirement plan to another.

Tax and penalty-free withdrawals -- You can take money out of your IRA tax-free and penalty-free as long as you repay the full amount within 60 days. It's a good way to give yourself an interest-free loan. You can only do this once every 12 months. There will be substantial penalties if you do not repay yourself as required.


Information and content on this page and website are general in nature and are for educational use only, based on what might be considered typical circumstances. It is not, in any way, intended to supersede or substitute for specific counsel from your CPA, attorney or professional tax provider. Please consult with a qualified tax advisor to find the best option for you.