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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generally be taxed as income in the tax year they are withdrawn.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."
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 . . .
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The 10% IRS early withdrawal
penalty will not apply to "
non-qualified"
distributions to which one
or more of the following exceptions apply:
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Ordering rules dictate that
distributions from a Roth IRA come first from:
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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.