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.
Remember every tax situation is different and you should consult your tax advisor on deductibility of IRA contributions.
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Even if contributions do not qualify for a tax deduction, the dividends earned are tax-deferred until the IRA funds are withdrawn.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 $5,500 for tax year 2014 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 $6,500 for 2014.
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 Contributions may be withdrawn tax and penalty free at any time. Earnings are tax free if the account is open for five years and withdrawn for a qualified reason.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 2014 is $5,500 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 $6,500 for 2014.
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
