Individual Retirement Accounts

Traditional Individual Retirement Account

Qualifications:

• To contribute to a Traditional IRA, you must have earned income. If married, both spouses qualify to contribute to a Traditional IRA as long as one has earned income.

Contributions:

• You may be able to deduct some or all of your contributions to a Traditional IRA.
• All interest earned is tax deferred until withdrawn.
• Your contribution can be split between a Traditional IRA and Roth IRA, but the combined contribution can not exceed the limits determined by the IRS annually. 

Roth Individual Retirement Account

Qualifications:

• To contribute to a Roth IRA, you must have earned income.
• There are no minimum or maximum age requirements to open and make contributions to a Roth IRA.
• If married, both spouses qualify to contribute to a Roth IRA as long a one has earned income.
• Contributions to a Roth IRA are subject to eligibility based on your modified adjusted gross income.

Contributions:

• Contributions to a Roth IRA are non-deductible.
• The earnings on the contributions accumulate tax-free as long as the five-year waiting period has been satisfied and qualifying distribution rules have been met.
• Your contribution can be split between a Traditional IRA and Roth IRA, but the combined contribution can not exceed the limits determined by the IRS annually. 

Simplified Employee Pension (SEP) Individual Retirement Account

A SEP-IRA is an account designated for small business or self-employed persons to set up a retirement plan for themselves and employees.

Qualifications:

• Any self employed individual qualifies to contribute to a SEP-IRA.
• If the employer has employees, then the employer must contribute for all eligible employees. Eligibility requirements are set by the employer. Minimum requirements are provided by the IRS.

Contributions:

• The employer can make annual contributions for himself/herself and eligible employees.
• The contribution deadline is the employer’s tax filing deadline plus extensions.
• The employer must contribute the exact same percentage of compensation for each employee as he does for himself/herself.

Coverdell Education Savings Account

A Coverdell Education Savings Account is a tax-free educational savings account established for the benefit of a child under the age of 18.

Qualifications:

• There are no age requirements for the contributor to open a CESA for a minor.
• The contributor does not have to have earned income.
• If the contributor does have earned income, phase-out levels have been established by the IRS.

Contributions:

• Individuals may make a nondeductible contribution annually per child as long as the accountholder does not fall into the phase out levels.
• This contribution does not reduce the accountholder’s annual contribution limit to an IRA for himself or herself.
• Contributions to a CESA are not subject to gift tax and the earnings will accumulate tax-free.

FOR DETAILED INFORMATION ABOUT ANY OF OUR ACCOUNTS, PLEASE CONTACT US FOR A COMPLETE ACCOUNT DISCLOSURE.

Contact First Heritage Bank for additional information regarding Individual Retirement Accounts.