Traditional IRA

A Traditional IRA is an individual retirement savings plan that offers tax-deferred earnings and the possibility for tax-deductible contributions. These tax advantages make the Traditional IRA a powerful tool in creating a balanced, long-term savings plan.

 

How does a Traditional IRA work?

We offer a variety of dividend rates and terms. Choose the IRA daily account – you can add to your account at any time (up to IRS maximums), or choose a 12, 24, or 36 month certificate to earn a fixed dividend rate.

You are eligible to contribute to a Traditional IRA as long as

        • you (or your spouse is fling a joint tax return) earn compensation from employment, or
        • you have not reached age 70 1/2 before the end of the year (once you have reached 70 1/2, however, you must remove a minimum amount from your Traditional IRA each year).

 

Can you move your Traditional IRA assets into another retirement plan?

Yes. If the plan allows for it, you may roll over the pretax or deductible portion of your Traditional IRA to an eligible employer-sponsored retirement plan. You also may move eligible Traditional IRA assets to a Roth IRA. Note that Traditional IRA assets cannot be moved into a SIMPLE IRA.

 

 Can you withdraw money from your Traditional IRA at any time?

You can always withdraw money from your Traditional IRA, unlike most other retirement plans. Early withdrawals made before age 59 1/2 are subject to 10% penalty. The penalty tax does not apply in the following situations:

  • Payment to beneficiaries, first-time home purchase, qualified higher education expenses, unreimbursed medical expenses, substantially equal periodic payments, disability, health insurance premiums during unemployment, IRS levy, qualified reservist distributions.

 

Will you ever be required to withdraw money from your Traditional IRA?

Yes. Because Traditional IRAs were meant to be used during retirement, once you reach age 70 1/2, the IRS mandates that you take out a minimum amount each year. The amount that you have to take generally is calculated by dividing the previous year’s ending account balance by a distribution period based on your age and the IRS’ life expectancy tables. Note that the amount required is the minimum you must take; you can always take more each year. If you fail to remove your required minimum amount by the end of the year for which it is due, you will be subject to an IRS penalty tax.

 

Will you have to pay tax on the amount you withdraw from your Traditional IRA?

You must include all pretax contributions and earnings in your taxable income when you withdraw money from your Traditional IRA. If you have made nondeductible contributions to a Traditional IRA or have rolled over nondeductible contributions from a qualified retirement plan to a Traditional IRA, a portion of each withdrawal will be treated as the nontaxable return of these contributions.