Individual Retirement Accounts (IRAs)

Baylands Federal Credit Union can help you make the most of your investment opportunities.

Retirement

During retirement, it’s crucial you have enough income to cover expenses.  You can help make sure you are financially prepared by adding an Individual Retirement Account (IRA) to your retirement plan.

What is an IRA?

An IRA (individual retirement account) is a form of retirement plan that offers certain tax advantages.  The two most common accounts are Traditional IRAs and Roth IRAs.  Each offers different tax advantages and benefits, so it’s important to compare them.

What’s the Difference?

Traditional and Roth IRAs both allow you to grow your money while receiving tax benefits.  However, there are some distinct differences.  The chart below provides a useful, comparative reference.  As with all tax decisions, it is recommended that you consult a tax professional in determining which product is right for your goals.

 

ROTH VS. TRADITIONAL
  Roth IRA Traditional IRA
Tax advantages
Contributions Not tax-deductible. Tax-deductible, subject to certain limitations.
Earnings Tax-free, subject to certain limitations. Taxes are deferred until you begin withdrawing funds.
Withdrawals Tax-free withdrawal of original contribution; potentially tax-free withdrawal of earnings if part of a qualified withdrawal. Taxable.
Contributions
Maximum Contributions 2017: Up to $5,500 for those under 50; $6,500 for those 50 and up. 2017: Up to $5,500 for those under 50; $6,500 for those 50 and up.
Eligibility No age restrictions. If you are single, you may have a modified Adjusted Gross Income (AGI) of up to $118,000 in 2017 to make a full contribution. If you are married filing jointly, you may have a modified AGI of up to $186,000 in 2017 to make a full contribution. Anyone with earned income may contribute up to age 70-1/2.
Withdrawals
Tax/penalty consequences Contributions can be withdrawn anytime without taxes or penalties. Earnings can be withdrawn, without taxes or penalties, if you are 59-1/2 and your account has been open five years or more. All earnings and deductible contributions are taxable upon withdrawal. Penalties will be assessed if withdrawals are taken before age 59-1/2, or if withdrawals are not taken by age 70-1/2.
Distribution requirements None. Required minimum distributions upon reaching age 70-1/2.
Exceptions to penalties Some exceptions are made if funds are used for a first-time home purchase, education or certain medical expenses. Some exceptions are made if funds are used for a first-time home purchase, education or certain medical expenses.

Other Advantages of Baylands IRAs

  • Excellent long-term savings vehicle
  • Flexible options – IRA savings, IRA share certificates, and more
  • Insured up to $250,000 by NCUA  

 

College Savings

Families need an easy way to save for a child’s education expenses.

A Coverdell Education Savings Account (formerly known as an Education IRA account) is a tax-advantaged investment account designed to encourage savings to cover future education expenses.  This includes primary and secondary schools, and not just colleges or universities.

Expenses include:

  • Tuition
  • Computers
  • Supplies
  • Books
  • Uniforms
  • Fees
  • and more!

The Coverdell Education Savings Account is available to children* under 18 years old and can receive up to $2,000 per year in after-tax contributions from relatives and friends.

Earnings grow tax-deferred and are tax-free when withdrawn to pay for qualified education expenses. The entire balance of the account must be withdrawn before the designated beneficiary turns 30 years of age.

You can choose from two great savings options

  • Share Savings Account
  • Fixed-Rate Share Certificate Account

Both accounts earn competitive rates and can be opened with minimal deposit. Please see our Rates Page for further information.  As with all tax-advantaged products, it is recommended that you consult a tax professional in determining if a Coverdell ESA is right for your goals.

For more information or to start a Coverdell Education Savings Account, stop by a branch or contact a Member Services Representative.

* Must be Baylands FCU member.