Individual Retirement Accounts (IRA)


Save for your future now with an IRA account from the State Bank of Medora. We offer both the Traditional IRA and the new Roth IRA. Below is an overview of each of these plans.

Traditional IRA

A Traditional IRA is an Individual Retirement Account other than a Roth IRA or a Simple IRA. It is a tax deferred savings plan authorized by the federal government to encourage you to accumulate money for retirement.

Traditional IRA Q & A:

Q: Who may contribute to a Traditional IRA?
A: Any individual who has been under the age of 70 1/2 years for the duration of the tax year and who has earned compensation or received alimony.

Q: When may I contribute to a Traditional IRA?
A: Qualified individuals can open or fund a Traditional IRA at any time. You have from January 1st of a calendar year until that year's tax filing deadline (typically April 15th of the following calendar year) to make a contribution for that tax year. Contributions made after the previous year's tax filing deadline are attributed to the current tax year.

Q: Is my Traditional IRA contribution tax deductible?
A: If you and your spouse are not covered by an employer sponsored retirement plan, you will receive a full deduction regardless of your income. Participation by you or your spouse in an employer sponsored retirement plan will affect your ability to deduct your Traditional IRA contribution. Contact a tax professional for further information.

Q: Are distributions from a Traditional IRA tax free?
A: Distributions attributable to deductible contributions and earnings will generally be taxed as income in the tax year they are withdrawn. If you have made non-deductible contributions, you will not have to pay tax on that portion.

Q: When can I take distribution from a Traditional IRA?
A: You can withdraw funds from your IRA any time after you reach age 59 1/2 . Distributions taken prior to age 59 1/2 are subject to a 10% early withdrawal penalty unless the distribution is:

  • made to a beneficiary due to an account holder's death.
  • made to an account holder who has become permanently and totally disabled.
  • made as part of a series of " substantially equal" periodic payments.
  • taken to pay for qualifying medical expenses or health insurance for unemployed individuals
  • taken to pay first time home purchase expenses or higher education expenses of qualified individuals

Q: When must I take distribution from a Traditional IRA?
A: As a Traditional IRA owner, you are required to begin taking minimum distributions from your accounts at age 70 1/2 . Your Required Minimum Distributions (RMD) must be distributed to you by December 31st of each year after that. You may choose to delay your first RMD until April 1st of the calendar year following the year in which you attain age 70 1/2 . However, if you choose to wait, you will also be required to take another distribution by December 31st of that same year to satisfy that year's RMD requirement. Taking your RMD is very important. Failure to take your full distribution will result in a 50% IRS penalty tax.

Roth IRA

A Roth IRA is an Individual Retirement Account to which participants are able to make annual non-deductible contributions. Unlike a Traditional IRA in which your earnings are tax deferred, Roth IRA earnings can be tax free.

Roth IRA Q & A:

Q: Who may contribute to a Roth IRA?
A: Single filers who have earned compensation or have received alimony totaling less than $120,000 for 2010 and $122,000 for 2011 may contribute, regardless of age. Married individuals filing jointly who have earned compensation or have received alimony totaling less than $177,000 for 2010 and $179,000 for 2011 may contribute regardless of age.

Q: When may I contribute to a Roth IRA?
A: Qualified individuals can open or fund a Roth IRA any time. You have from January 1st of a calendar year until that year's tax filing deadline (typically April 15th of the following calendar year) to make a contribution for that tax year. Contributions made after the previous year's tax filing deadline are attributed to the current tax year.

Q: Is my Roth IRA contribution tax deductible?
A: Contributions to Roth IRA are not tax deductible.

Q: Are distributions from a Roth IRA tax free?
A: " Qualified Roth IRA distributions" may be withdrawn tax and penalty free. " Non–qualified" distributions may be taxable and subject to an IRS 10% early distribution penalty.

Q: When can I take a distribution from a Roth IRA?
A: You may withdraw your contributions from your Roth IRA at any time, tax and penalty free. " Qualified distributions" of your earnings may also be taken tax and penalty free. Please refer to the table below for an explanation of the requirements of " qualified distributions."

Qualified Roth IRA Distributions

In order to be a "qualified distribution" the following characteristics MUST apply: You have been a participant in the Roth IRA for over five years, beginning with the first year in which the account was converted or a contribution was made AND . . .
  • you have reached age 59 1/2 or,
  • the distribution is paid to a beneficiary due to your death.
  • the distribution is paid following your becoming permanently and totally disabled
  • the distribution is paid to you for the first time purchase of a home up to $10,000
The 10% IRS early withdrawal penalty will not apply to " non-qualified" distributions to which one or more of the following exceptions apply:
  • you have reached age 59 1/2 or,
  • the distribution is paid to a beneficiary due to your death.
  • the distribution is paid following your becoming permanently and totally disabled
  • the distribution is paid as a part of " substantially equal" periodic payments
  • the distribution is used to pay for medical expenses in excess of 7.5% of your AGI
  • the distribution is used to pay for health insurance premiums if you have been unemployed for 12 or more weeks. the distribution is paid to you for the first time purchase of a home, up to $10,000.
  • the distribution is used to pay for qualified higher education expenses.
Ordering rules dictate that distributions from a Roth IRA come first from:
  • (1) Annual contributions
  • (2) Rollover contributions on a first in, first out basis (with the dollars that were includable in income as a result of conversion coming out before nontaxable dollars)
  • (3) post-contribution earnings

Q: When must I take a distribution from a Roth IRA?
A: Roth IRA owners are never required to take a distribution from their accounts at any age.