Your Path to Growth
Building a secure future for yourself and your family isn’t exactly a walk in the park. You’ll put in some work. An IRA from UFCW Community FCU can be a powerful tool on your financial journey. Whether you are looking to permanently plant your derrière on sandy beaches in your golden years or want to set your children up for success to achieve their educational goals, IRAs offer tax advantages and the potential for significant growth to get you there.
Traditional IRA
Tax-Advantage Retirement Savings
Looking to lower your taxable income today and potentially enjoy tax benefits in retirement? A Traditional IRA might be the perfect fit!
This plan offers tax-deferred earnings and the possibility for tax-deductible contributions (look at it as its own reward for being financially responsible). The plan is subject to IRS regulations.
Tax-Deductible Contributions: Contributing to your Traditional IRA may reduce your taxable income for the year (Check IRS limits for contribution amounts).
Tax-Deferred Growth: Your money grows tax-free until you withdraw it in retirement (taxes apply then).
Ideal for: Those in a higher tax bracket now who expect to be in a lower tax bracket later in retirement.
Roth IRA
Tax-Free Retirement Savings
We don’t think anyone actually likes paying taxes, but we have to do it. It’s like paying for a gym membership you never use. There’s really no escaping it, but a Roth IRA lets your after-tax contributions and earnings grow tax-free. It may not be a magic money tree, but it does offer some pretty sweet tax advantages for your future.
Non-Deductible Contributions: Contributions are made with after-tax dollars, but your money grows tax-free, and qualified withdrawals in retirement are also tax-free.
Tax-Free Withdrawals: Enjoy tax-free and penalty-free access to your contributions (earnings still subject to tax rules).
Ideal for: Those in a lower tax bracket now who expect to be in a higher tax bracket later in retirement.
Traditional vs. Roth IRA
| Account Type | Traditional IRA | Roth IRA |
|---|---|---|
| Tax Advantage | Tax - Deferred Earnings | Tax - Free Earnings |
| Eligibility | You must have earned income equal to or greater than your contribution No maximum income limit No maximum age to contribute | You must have earned income equal to or greater than your contribution Your modified adjusted gross income must fall within the limits prescribed by the IRS No maximum age to contribute |
| Minimum Initial Contribution | $5.00 | $5.00 |
| Maximum Contribution Allowed by Law | Check out current IRS limits at irs.gov | Check out current IRS limits at irs.gov |
| Tax Deductibility | If you are not covered by an employee-sponsored retirement plan, contributions are fully deductible regardless of income If you are covered by an employee-sponsored retirement plan, your deductible amount depends on your income | Contributions are non-deductible |
| Taxes on Withdrawals | Ordinary income tax on earnings and deductible contributions No federal tax on non-deductible contributions State taxes may apply | Distributions from contributions are tax-free Distributions from earnings are federally tax-free if you have had your Roth IRA for at least five years and you are over age 59 1/2, or you have had your Roth IRA for at least five years and the distribution is due to your death or disability for a first-time home purchase State tax may apply |
| Penalty for Early Withdrawal | 10% federal penalty on withdrawals before age 59 1/2 unless an exception applies | Distributions from contributions are penalty-free 10% federal penalty on withdrawals of earnings before 59 1/2 unless exception applies |
| Required Minimum Distributions | After age 73 | None |
| Contribution Deadline | Generally, April 15 or the tax filing deadline of the following year for any given tax year | Generally, April 15 or the tax filing deadline of the following year for any given tax year |
*If you are married and filing a joint income tax return, your non-working spouse may also contribute to an IRA. The total contribution for both spouses can not exceed the income of the working spouse for the contribution year.
Coverdell Educational Savings Account (ESA)
Remember the costs of textbooks? Yeah, those prices haven’t gotten better. A Coverdell ESA helps combat the rising costs of higher education and lets you contribute money to grow tax-free for future educational expenses like tuition and textbooks. Give your children a head start on their college savings and help them avoid the stereotypical ramen noodle diet.
No minimum is required to open
Deposits allowed until 18th birthday
Contributions are not tax-deductible
Earnings can be withdrawn tax-free, as long as it is used for education
UFCW Community FCU has your back when it comes to planning for your future. Have questions or are you ready to get started? Give us a call or drop by any of our branches.