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IRA Accounts

Excellence in Retirement Savings

At Metro Community Federal Credit Union, you have several options to save for retirement, all of which are separately insured up to $250,000 by the NCUA. Many of these plans allow you to contribute pre-tax dollars, maximizing your retirement savings. In addition, MCFCU offers the Coverdell Education Savings Account (ESA), an IRA-like account that lets you grow funds potentially tax free. You can save up to $2,000 annually for a child's elementary and secondary education with this account.

Choose an account that's best for you:

Traditional IRA

One of the smartest ways to grow additional savings for your retirement, the IRA earns dividends just like a savings account, but with a twist. Dividends that are paid are not taxed as long as they stay in the IRA. Escondido Federal Credit Union pays dividends each month, so your earnings add up faster! Earnings continue to be tax deferred until you start to withdraw from the IRA. A significant benefit: if you meet certain qualifications, your contributions may be tax deductible,* letting you save even more!

  • Eligibility—member of MCFCU, under age 70½, earning income.
  • No monthly fee when a low minimum balance requirement is met ($100).
  • No set up fee, no administrative fee.
  • Dividends—calculated daily and paid monthly.
  • Safety—each IRA is separately insured up to $250,000 by the NCUA.
  • Convenience—access your account online banking.

Spotlight on Traditional IRA

Who may contribute, and how much? An individual may contribute as long as the IRA holder meets the following:

  • Has not reached the year in which they turn 70½, and
  • Has earned income equal to or greater than the Traditional IRA contribution.

An IRA holder may contribute up to the lesser of:

  • 100% of earned income, or
  • $5,500 - under age 50 (2013 and 2014)**
  • $6,500 – age 50+ (2013 and 2014)**

Contributions, Tax Benefits, and Withdrawals

  • No contributions may be made past age 70½.
  • Tax benefits—taxes on pre-tax contributions and earnings are deferred until you start to withdraw from the IRA. Contributions may be tax deductible.**
  • Withdrawals—may be made without penalty starting at age 59½. You must start making withdrawals at age 70½.
  • Early withdrawal will incur penalties except under special circumstances.**

**Ask your qualified tax professional for requirements.

Roth IRA

Another option for tax deferral, the Roth IRA lets you make withdrawals without having to pay taxes on the amount withdrawn or on earnings as long as you follow IRS rules. Contributions you make to a Roth IRA are not tax deductible. Ask your qualified tax professional whether a traditional or Roth IRA is best for you.

  • Eligibility—member of MCFCU, earning income.
  • No monthly fee when a low minimum balance requirement is met ($100).
  • No set up fee, no administrative fee.
  • Dividends—calculated daily and paid monthly.
  • Safety—each IRA is separately insured up to $250,000 by the NCUA.
  • Convenience—access your account via online banking.

Spotlight on Roth IRA

Who may contribute? Unlike the Traditional IRA, there is no 70½ age limit on making contributions. You do, however, need earned income, which is defined the same as for Traditional IRAs. As long as you satisfy the Roth IRA requirements, you may contribute to a Roth IRA, even after the year in which you attain age 70½.*

How much can I contribute?

  • 100% of earned income, or
  • $5,500 - under age 50 (2013 and 2014)*
  • $6,500 – age 50+ (2013 and 2014)*

Contribution eligibility to a Roth IRA depends on the individual's (or if married, the individual and the spouse's) modified adjusted gross income (MAGI) and income tax filing status. The amount that an individual is eligible to contribute may be reduced depending on his MAGI, and if the MAGI falls within certain phase-out ranges.*

Tax Benefits and Withdrawals (Distributions)

Individuals may take a qualified distribution from a Roth IRA tax and penalty free. A distribution of Roth IRA assets is considered a qualified distribution if two requirements are met. First, your Roth IRA must have been open for a minimum of five years. Second, the withdrawal must be made because of the occurrence of one of the following events.*

  • You have reached age 59½.
  • You are using the funds (up to $10,000), for the purchase of your first home.
  • You have become disabled.
  • Distributions are made to your beneficiaries in the event of your death.

To get more information, give us a call or visit one of our branches during business hours.

* Ask your qualified tax professional for complete information

Coverdell Education Savings Account (ESA)

Saving for your child's education? One way to accelerate the growth of the money you're saving is the Coverdell ESA.

  • No monthly fee when a low minimum balance requirement is met ($100).
  • No set up fee, no administrative fee.
  • Dividends—calculated daily and paid monthly on balances of $100 or more.

What is a Coverdell Education Savings Account (ESA)? Contributions are invested for the purpose of funding an individual's education. ESA contributions are not tax-deductible, but the contributions may earn interest tax deferred until distributed, and the child will not owe tax on any withdrawal from the account if withdrawal is equal to or less than the child's qualified education expenses at an eligible educational institution for the year. Amounts withdrawn from an ESA that exceed the child's qualified education expenses in a taxable year may be subject to income tax and to an additional penalty of 10 percent. If the child does not need the money for pre- or postsecondary education, the child may roll or transfer the account balance to an eligible family member's ESA or to a qualified tuition program (QTP).*

Who can contribute to a Coverdell Education Savings Account? The answer to that question is almost everyone.

  • Individuals of any age.
  • Individuals without earned income.
  • Individuals with modified adjusted gross income (MAGI) within the applicable limits for their filing status.
  • Any corporation or other entity (including tax-exempt organizations) irrespective of income limits.

There are two key limitations:

  • Each child can receive a total of the maximum allowed per year in contributions from all sources. It does not make a difference if this is done in a single account or multiple accounts designed to benefit the same child.
  • In 2010, individuals may be limited in the amount of their contributions if their modified adjusted gross income (MAGI) exceeds $95,000 for single filers or $190,000 for married tax filers. Above these income levels, the ability to contribute is phased out. If income exceeds $110,000 for single tax filers, or $220,000 for married tax filers, no contribution is allowed.

What is the contribution limit? Eligible taxpayers may deposit up to $2,000 per year into a Coverdell ESA for a child under the age of 18. Parents, grandparents, other family members, friends, and even the designated beneficiary of the ESA (child) may contribute to an ESA for the same child, but the total contributions for a child for a taxable year cannot exceed $2,000. Eligible taxpayers may contribute up to $2,000 for multiple children in a year, however.

Who is a designated beneficiary? A designated beneficiary of an ESA is the person on whose behalf the ESA has been established.

What is a qualified education expense? A qualified elementary, secondary or higher education expense is one that is required for the enrollment or attendance by your child at an eligible educational institution.*

These expenses include the following:

  • Tuition
  • Fees
  • Books
  • Supplies
  • Equipment
  • Academic tutoring
  • Special needs services
  • Room and board expenses
  • Uniforms
  • Transportation
  • Educational computer technology or equipment
  • Internet access

To get more information, give us a call or visit one of our branches during business hours.

*As your qualified tax professional for complete information.

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