Individual Retirement Account (IRAs)

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Individual Retirement Accounts (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

IRS Contribution Limits

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

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Coverdell Education Savings Accounts (CESA)

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

How much can I contribute to my Roth IRA?

There are limits on the amount of income one can make during a given year—and the limits change from year to year. Please visit the IRS website for details.
I am recently unemployed, can I rollover my 401(k) to an IRA?

Yes, you can rollover your 401(k) plan into a Traditional IRA. Contact Member Service for assistance in processing a Direct Rollover. A statement of your 401(k) plan should be provided.
What is a Roth IRA?

A Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. Roth IRA accounts are traditionally used as retirement savings accounts. They allow limited contributions to be made throughout the tax year and can be withdrawn within 5 years after establishing the account provided you are aged 59 1/2 or older.
Who can contribute to a Roth IRA?

Those who work for a living can contribute to a Roth IRA account. The income must be derived from actual work efforts and compensation in the form of wages, tips, salaries, bonuses and professional fees.
Will I earn interest on my money if I put it into a Roth IRA?

Yes, you will earn interest on the funds that are on deposit at the credit union in your Roth IRA.
Will my Roth IRA affect the amount that I can contribute to my employer-sponsored retirement plan?

No. The amount you contribute to your 401(k) or other employer-sponsored plans will not be affected by your Roth IRA.
How do I open an IRA through SCU Credit Union?

You can easily open your IRA online or by visiting one of our branches, where our team will assist you.
What is the difference between an IRA Certificate and an IRA Savings Account?

An IRA Certificate offers fixed high-yield returns, while an IRA Savings Account provides flexible, variable-rate savings and ongoing contributions.
Are there penalties for early withdrawals from an IRA?

Yes, there are early withdrawal penalties out of an IRA if it is made before the age of 59.5 and the 5-year rule (ROTH ONLY) has not been met. This is an IRS penalty that is universal across all institutions. Please consult a tax professional for any additional details.
Can I set up automatic payments in retirement, so I do not have to worry about RMDS?

Yes! We make it easy for our members satisfy the Required Minimum Distributions each year to avoid any IRS fees.
What is the benefit of moving my retirement accounts to SCU Credit Union?

Many people find it easier to keep control of their finances if their accounts are all consolidated into one place. You can also take advantage of our IRA Certificate rates as well when moving your account to SCU. With the stated APY rates it makes it easier to calculate your future earnings!
Can I bring over my existing IRA or 401k to SCU Credit Union?

Yes! You can rollover or transfer your existing IRA or employer retirement account (such as a 401k or 403b) into an IRA at SCU Credit Union.
What types of IRAs does SCU Credit Union offer?

SCU Credit Union offers Traditional, Roth, SEP, and Coverdell Education Savings Accounts (CESA).
Can I have both a traditional and a Roth IRA?

Yes, you can maintain both types of IRAs at the same time. You can even make contributions to both types of IRAs in the same year. But your contributions to both Roth and traditional IRAs cannot exceed the maximum contribution limit for all IRAs.
What is a Required Minimum Distribution (RMD)?

A required minimum distribution (RMD) is the minimum amount you must withdraw from Traditional IRA accounts annually starting the year a member turns 73 years old. If the RMD is not satisfied, then the IRS will penalize the IRA owner. Keep in mind there are no RMDs for ROTH IRA accounts.
What is an Individual Retirement Account (IRA)?

An Individual Retirement Account (IRA) is a tax-advantaged account that allows you to save for retirement with benefits like tax-deferred growth or tax-free distributions.