It used to be that when folks talked of an IRA, they were referring to exactly that: an Individual Retirement Account. While an IRA is still one of the best ways to plan for those post-employment "golden" retirement years, you can now use an IRA to help plan for some of life's other major events...the purchase of a first home...your children's college education...a medical disability. Depending on your needs, one (or more) of American Eagle Federal Credit Union's federally insured IRA options may be right for you!

Which IRA is Right for You?

Determine Your IRA Deduction

Rollovers or Transfers?

It's Easy to Get There!

Distinguishing Features of IRAs

Which IRA is Right for You?
Coverdell Education IRA | Roth IRA | Traditional IRA

As with all financial investment decisions, an informed consumer is a savvy one. For many people, the primary distinction between using a Roth IRA and selecting a Traditional IRA depends upon where you believe your tax liability to be greatest: now or at retirement. Does your tax filing situation benefit from having tax-deferred interest on your savings now? Or do you anticipate that your future tax bite during retirement years might be even bigger and, hence, want to reduce that future liability? If you are nearer to the beginning of your working career and haven't yet purchased your first home, the Roth IRA provides a viable option. Likewise, an Coverdell Education IRA makes sense when you have children. Your own tax or financial advisor can provide additional details specific to your investment and tax-planning strategy. At American Eagle Federal Credit Union, we're here to help you make the most of your savings...while you make your plans for the future!

Coverdell Education IRA
The Coverdell Education Savings Account (ESA) allows investors to make non-deductible annual contributions of up to $2,000 per child. The earnings build up and therefore the withdrawal would be tax-free, as long as the proceeds are used for qualified, education expenses. 

The Education IRA allows up to the full contribution of $2,000 each year if you are a single tax filer and your income is under $95,000; the contribution limit decreases for income levels above that until it reaches $110,000 (for which an Educational IRA is not permitted). Married couples who file jointly may contribute the full $2,000 per year per child for income levels up to $190,000; again, the contribution limit gradually decreases to zero at the income level of $200,000.

Contributions to your child's Education IRA may be made by anyone (parents, grandparents, aunts, uncles, etc.), provided that the annual contribution per child does not exceed $2,000.

Roth IRA
This IRA is similar to a Traditional IRA in that it allows contributions up to $4,000 per year (for 2005-2007). However, instead of providing a tax deduction, you earn interest tax-free and pay no taxes when the money is ultimately withdrawn. Funds may be withdrawn provided that they have remain untouched in the account for at least five years and one of the following criteria applies: you reach age 59 1/2, you become disabled, you purchase your first home (up to $10,000), or you die (funds paid to your beneficiary).

Additionally, a Roth IRA can continue to accumulate beyond age 70 1/2 (the age at which a Traditional IRA mandates you begin to withdraw funds annually); mandatory withdrawals are not required.

If you are a married couple filing jointly, you may contribute up to $4,000 (for 2005-2007) for income levels up to $160,000; this gradually decreases to zero by the time an income level of $170,000 is reached. For those filing singly, the limit of $4,000 (for 2005-2007) extends to a $95,000. From this point, it decreases to zero at the $110,000 income level.

Traditional IRA
This IRA delivers money-saving benefits today and for the future. For members who qualify, it offers a tax deduction and provides a tax shelter that can help you build substantial savings for retirement. Financial experts agree that you will need approximately 60-70% of your final salary to maintain your standard of living during your retirement years.

As a result of the Taxpayer Relief Act of 1997, a working spouse not already covered by an employer retirement plan can contribute up to $4,000 (for 2005-2007) to an IRA, which is fully deductible from taxable income. A non-working spouse can contribute up to $4,000 (for 2005-2007) to an IRA as well, even if the spouse is covered under a plan. Withdrawal penalties before age 59 1/2 have been eliminated for qualifying special purposes (i.e., higher educational expenses for self, spouse, child, or grandchild). Finally, adjusted gross income limits have been increased for a fully deductible IRA.

Determine Your IRA Deduction

If you do not participate in a pension or other qualified plan, such as a 401(k), you may deduct your entire $4,000 Traditional IRA contribution. If you do participate in a pension or qualified retirement plan at work, you may be able to deduct a portion of your IRA contribution. 

Mix and Match Your IRAs
Depending upon your investment needs and tax strategy, you may wish to choose more than one IRA. Each qualified individual may contribute up to $4,000 per year, in total, to one or more IRAs-i.e., contribute $2,000 to a Traditional IRA and $2,000 to a Roth IRA. In addition, Education IRAs may also be established, even after you've contributed $4,000 to a Traditional or Roth IRA.

Rollovers or Transfers?

There's no limit to the amount you can rollover to your Credit Union IRA from qualified retirement plans. However, the IRS has strict requirements for handling tax-deferred rollovers and transfers. Call Deposit Services at extension 5354 and 5202 if you need assistance.

Rollover...If you leave a company and take pension, retirement, or profit-sharing funds with you, those funds are taxable and your former employer is required to withhold federal income tax at a rate of 20%. You may, however, make a rollover contribution to your IRA with these funds within 60 days. This would reduce your tax liability or eliminate it if you made up the 20% withholding.

Direct Rollover...When you authorize direct rollover, you can avoid the 20% withholding requirement altogether. Ask your employer to make a direct rollover into your Credit Union IRA.

Transfer...You can have funds transferred from an IRA at another financial institution to your Credit Union IRA. The transaction is not reportable to the IRS.

It's Easy to Get There!

American Eagle Federal Credit Union offers a unique "accumulator" account option. You determine what deposits you wish to make and how frequently; your money grows while in an interest-bearing savings account. Once the minimum IRA level is reached ($1,000 for either the Roth IRA or the Traditional IRA; $500 for the Education IRA), you can transfer the funds to the appropriate certificate to earn higher dividends. You choose the renewable term of your certificate: 3, 6, 12, 18, 30, 48, and 60 months. There is a seven day grace period following the maturity of a certificate account, during which you may withdraw the funds without being charged an early withdrawal penalty. Dividends are calculated by the daily balance method and compounded and paid monthly. Check out our current certificate rates.

Distinguishing Features of Individual Retirement Accounts

Each Member account is federally insured up to $100,000 by the National Credit Union Administration, a U.S. Government agency.

* you reach age 59 1/2, you become disabled, you purchase your first home (up to $10,000), or you die (funds paid to your beneficiary).