As part of our goal to help you afford life, GEMC Federal Credit Union (GEMC FCU) offers multiple IRA options that go beyond just planning for retirement, including Traditional, Roth and Coverdell Educational IRAs. Each of these IRAs has unique features, guidelines and tax implications, so we recommend that you talk with your tax advisor to learn more about these options. We are always right here to help you decide what is best for you and your family’s financial future. So feel free to ask! Here are a few brief descriptions to help you get started.
You can open and deposit into a Traditional IRA on your own, without any employer participation, until you reach the age of 70 ½. These contributions are tax-deductible and all interest you earn on them will be tax-deferred, meaning you won’t need to pay those taxes until you withdraw funds after retirement. If something should come up and you need to dip into those funds before you turn 59 ½ years of age, you may do so, but a 10 percent early distribution penalty may apply. This penalty will not apply if you are withdrawing funds for major life events, such as disability, unemployment, a qualifying first home purchase, qualifying education expenses, death or receiving your IRA assets in equal payments over your life expectancy after age 70 ½.
A Roth IRA is not tax-deductible, but taxes are already taken out of the principal amount when it is contributed, so you can withdraw funds from those principal contributions at any time, tax-free. The interest you earn, however, will not be tax-free until you are over the age of 59 ½, have held the account for at least five years, and experience a qualifying major life event. Unlike a Traditional IRA, there is no limit on how long you can pay into a Roth IRA and you will not be required to take payments at age 70 ½.
When it comes to preparing a child in your life for education expenses, contributing to a Coverdell Educational IRA is a great first step. You can open this IRA for any child under the age of 18. Contributions can be made by anyone in that child’s life up to an collective total of $2,000 each year until they turn 18. Those funds can be withdrawn to help pay for college expenses like tuition, books, room and board (for full-time students), and more (and even some K-12 expenses may qualify as well). If the recipient decides not to attend college, then that child will need to withdraw all of the funds by his or her 30th birthday to avoid penalties.
If you would like more information about GEMC FCU’s IRA contribution guidelines and limitations, please feel free to contact us.Go to main navigation