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Accounts

Accounts

Investment Accounts

Individual Retirement Accounts

An Individual Retirement Account (IRA) is a good way to save for retirement. There are three IRA accounts available at NOFFCU: Traditional, Roth and Coverdell Education Savings Account (CESA). Each IRA can be invested two ways: in an IRA savings account or IRA share certificate.

If you would like to transfer funds from an existing IRA or retirement plan into an NOFFCU IRA or IRA Term Share Certificate, call 504-889-9090 or 800-647-1689 for more information.

Traditional IRA

Many taxpayers enjoy partial or full tax deductibility on Traditional IRA contributions. Even if contributions do not qualify for a tax deduction, the dividends earned are tax-deferred until the IRA funds are withdrawn.

Eligibility
Any wage earners under 70 1/2 years old or anyone who files taxes jointly with a spouse who earns compensation are eligible to open a Traditional IRA.

Contribution Limits
The annual contribution is limited to $5,000 for tax year 2010 or 100% of compensation, whichever is less, and contributions may be made from January 1 of the current year through April 15 (tax return deadline date) of the following year. For owners age 50 and older, limits increase to $6,000 for 2010.

Withdrawals (Distributions)
Withdrawals can be made after age 59½ without penalty.  Withdrawals are required the year the IRA account holder reaches age 70 1/2.

Penalties
Early withdrawals are subject to a penalty tax of 10 percent of the amount of the withdrawal.

If required distributions are not taken by age 70 1/2, a 50% penalty will be assessed on the amount not taken.

Roth IRA

Contributions to a Roth IRA are not tax deductible. Contributions may be withdrawn tax and penalty free at any time. Earnings are tax free if the account is open for five years and withdrawn for a qualified reason.

Eligibility
Any wage earners or anyone who files taxes jointly with a spouse who earns compensation are eligible to open a ROTH IRA. There are no age restrictions.

Contribution Limits
The annual contribution limit for 2010 is $5,000 or 100% of compensation, whichever is less, and contributions may be made from January 1 of the current year through April 15 (tax return deadline date) of the following year. For owners age 50 and older, limits increase to $6,000 for 2010.

Withdrawals (Distributions)
Withdrawals of contributions are tax and penalty-free at any time. Earnings are tax-free if you have had an account for five years and one of the following qualifying reasons applies:

  • After age 59 1/2
  • Death
  • Disability
  • First-time home purchase ($10,000 lifetime limit)

There are no mandatory withdrawals and no age at which withdrawals must begin.

Penalties
There is a 10% penalty on withdrawals of earnings prior to age 59 1/2 except for withdrawals due to:

  • Death
  • Disability
  • Pre-59 1/2 periodic payments
  • Qualifying medical expenses
  • Health insurance premiums while unemployed
  • Withdrawals with a $10,000 lifetime limit toward the purchase of a first home
  • Higher-education expenses
  • Federal Tax Levy

Coverdell Education Savings Account (CESA)

The Coverdell Education Savings Account was created to help parents save for qualified education expenses for a child. Withdrawals are tax and penalty free only for qualified education expenses.  If not used by age 30, funds may be transferred from the beneficiary’s account to another child within the family.

Eligibility
A Designated Beneficiary (the child for whom the account is established) is listed as the primary owner of the CESA.  This beneficiary must be under age 18; older if a special needs beneficiary.

Contribution Limits
No more than $2,000 can be contributed yearly and contributions may be made from January 1 of the current year through April 15 of the following year.  Contributions are not tax deductible, but earnings are tax –free if used for education expenses.

Withdrawals (Distributions)
Withdrawals can be made for tuition, fees, books, supplies and equipment.  Funds can be used for kindergarten through 12th grade as well as post secondary - institution expenses, whether public, private or religious school. Allowed expenses include computer equipment and software.

Balance of the CESA must be distributed by the time the beneficiary is age 30 (except for special-needs beneficiaries)

Penalties
If the balance of the CESA is not distributed by age 30, earnings on the account will be taxable and subject to the additional 10% tax.

The beneficiary may avoid these taxes by rolling over the full balance to another CESA for another family member under age 18.

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