Individual Retirement Account

Is an IRA right for you? Take our Cornerstone Bank One-Minute IRA Test and find out. Then call one of our customer service representatives today or check out our current rates.

You might also be able to save on your present taxes with an Individual Retirement Account, by deducting your qualified contributions from your taxable income. Many Americans can deduct all or part of their IRA contributions from current income taxes. The deductible amount depends on your income, marital status and whether you’re an active participant in an employer sponsored plan as defined by the Internal Revenue Service.

With an Individual Retirement Account, you may also be able defer taxes until you retire when you will probably be in a lower tax bracket. The chart below shows you how much you may be able save each year. You may want to consult your tax adviser to review the tax deductible status of an IRA. Regardless of the amount you’ll be able to save now on taxes, an IRA is a smart way for you to save for a secure retirement.

If you’re changing employers, an IRA rollover makes sense. If you are retiring or changing jobs and anticipate withdrawing money from your employer’s retirement plan, you can avoid withdrawal penalties by transferring your assets into an IRA or another qualified plan. You can ask your employer to arrange for a “direct rollover” of your money into a new IRA account with us, or you can do it yourself with an IRA-to-IRA rollover.

You must complete the rollover within 60 days from the date you receive the assets from your old IRA in order to qualify and not pay the mandatory 20% withholding and possibly other penalties as well. For more information about IRA Rollovers or opening a new IRA just give us a call at your local branch.

What’s the Difference Between a Traditional IRA and a Roth IRA?

Traditional IRA – The traditional IRA allows you to defer taxes on the earnings on your contributions until they are withdrawn. Also, certain contributions are tax deductible in the tax year for which you make them.

Roth IRA – The Roth IRA allows only nondeductible contributions and features tax-free withdrawals for certain distribution reasons after a five-year holding period. Since Roth IRA contributions are nondeductible and taxed in the year they are earned, if you expect to be in a higher tax bracket when you retire, you may benefit more from a Roth IRA than from a traditional IRA.

Am I Eligible to Make a Regular Contribution to Either Account?

Traditional IRA – You are eligible to establish a traditional IRA and make regular contributions if you are younger than age 70^1/2 for the entire tax year and you or your spouse have compensation.

Roth IRA – You are eligible to establish a Roth IRA and make regular contributions if you or your spouse have compensation and your modified adjusted gross income (MAGI) for any tax year does not exceed certain prescribed limits. These limits are subject to annual cost-of-living adjustments (COLAs).

You may establish a Traditional or Roth IRA even if you already participate in or are receiving contribution in a retirement plan sponsored by your employer, which may include certain government plans, tax-sheltered annuities, simplified employee pension (SEP) plans, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE), or qualified plans.

This is intended to provide general information on federal tax laws governing traditional and Roth IRAs. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances. For specific information, you are encouraged to consult your tax or legal professional. IRS Publication 590, Individual Retirement Arrangements (IRAs), and the IRS website, www.irs.gov, also provide helpful information.

Source: Traditional and Roth IRA: Which IRA is Right for You?, Wolters Kluwer Financial Services (2008)