Individual Retirement Account (IRAs)
Retirement might seem like a long way away, but it’s never too early (or too late!) to start saving for it. With an induvial retirement account, you can start saving for retirement with tax advantages over other savings methods.
Come in to one of our locations and come and talk to a member of our staff or call us at 877-661-3300 to get started.
Traditional IRA vs Roth IRA
Traditional IRA
- Contributions tax deductible in year made
- Tax deferral on earnings (no tax while money is in account)
- Distributions are fully taxed as ordinary income
- Minimum distributions required when you reach 73 (subject to increase in future)
Roth IRA
- Contributions not tax deductible in year made
- Tax deferral on earnings (no tax while money is in account)
- Distributions are tax free
- No required minimum distributions
Which Account is Right for You?
It is important to understand the fundamental differences between the ROTH IRA and Traditional IRA. The major difference is the time in which the IRA account owner pays taxes.
Pre-Tax Dollars -> Traditional IRA
- Contributions made into a Traditional IRA are made with pre-tax dollars. This means that any contributions made into the Traditional IRA are Tax Deductible in the tax year they are made. This means that the taxes are paid on the back end when the withdrawal out of the IRA takes place
After Tax Dollars -> Roth IRA
- Contributions made into an ROTH IRA are made with dollars that have already been taxed. Therefore, at the time of withdrawal there are no taxes due. This means all earnings are tax free in the account
Another factor to consider in choosing your IRA account are tax brackets. More specifically, do you expect to be in a higher tax bracket or a lower tax bracket in retirement?
Lower Tax Bracket Expectation --> Traditional IRA
- Why? Traditional IRAs will result in your tax advantage occurring when your taxes would be lower
Higher Tax Bracket Expectation --> Roth IRA
- Why? Roth IRAs will delay the tax benefit to when your tax rate would be higher.
Please note that it is also best practice to consult a tax professional or a financial advisor to fully understand which account type is best for you based on your financial situation.
Benefits of the Roth IRA
- Most people will advance to a higher tax bracket as they move forward in their career.
- With ROTH IRAs you can withdraw your contributions without taxes or penalties, so long as the account has been open as of 5 years and a contribution was made at account opening.
- There is a requirement to take withdrawals out of a traditional IRA when you obtain the age of 73.
- Estate planning – money unused can be passed down to beneficiaries in a tax-free inherited Roth IRA
Want more information? Come in to one of our locations and come and talk to a member of our staff or call us at 877-661-3300
Education is a key to unlocking amazing potential, but it often comes with a real financial cost. We want to help you save money for your beneficiaries to get the education they deserve. A CESA is a trust or custodial account set up solely for paying qualified education expenses for the designated beneficiary (under the age of 18) of the account.
Simplified Employee Pension (SEP)
A Simplified Employee Pension (SEP) plan allows employers to contribute to Traditional IRAs set up for employees. A business of any size, even self-employed, can establish a SEP.
For employers, we can help you set up an SEP for your employees.
For employees, see if your employer offers retirement benefits as they are a great way to increase the amount of savings you can put away for retirement.
Your money is 100% safe. 100% insured.
SCU Credit Union is insured by both the National Credit Union Association (NCUA) and Massachusetts Shared Insured Corporation (MSIC). Your money is 100% insured regardless of the amount at SCU Credit Union. MSIC provides Excess Share and Deposit Insurance to all members of SCU Credit Union automatically. The coverage is a benefit of membership and comes at no direct cost to you. MSIC insures the portion of any legal, verifiable share or deposit account that exceeds NCUSIF coverage with no limit.
IRAs | frequently asked questions