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INDIVIDUAL RETIREMENT ACCOUNT (IRA)

Is living comfortably after retirement a goal you are trying to achieve? If so, Food Industries Credit Union has the resources to help you. With our Traditional IRA, we can help you prepare for a financially secure future, as well as providing you with possible savings on your annual income taxes.

Contributions to your IRA are flexible. You may make multiple deposits as long as your IRA contributions do not exceed the annual IRS limits.

If you want to know more about Traditional IRA, please read our Frequently Asked Questions.

Frequently Asked Questions    |   Savings Calculator    |   IRA & IRA Certificate Rates
IRA Contribution Limits
Year
Age 49 & Below
Age 50 & Above
2009
$5,000
$6,000
2010
$5,000
$6,000
Important!
Food Industries Credit Union is not a tax advisor. Please consult your personal tax advisor before making any tax related investment decisions.

FREQUENTLY ASKED QUESTIONS

These Frequently Asked Questions are not intended as tax advice. Please consult a tax professional.

Q. What is a traditional IRA?
A. A traditional IRA is a type of retirement plan that has been in existence since 1975. Traditional IRAs offer tax-deferred earnings, and the possibility for tax-deductible contributions. These tax advantages make the traditional IRA a powerful tool in creating a balanced, long-term savings plan.

Q. How does the traditional IRA work?
A. You can contribute to a traditional IRA if you earn compensation and you will not reach age 70-1/2 by the end of the year. If you file a joint tax return, you can treat your spouse’s compensation as your own (except your combined contributions cannot exceed your combined compensation). All earnings in the traditional IRA are not taxed until they are withdrawn. The ability to defer taxes on the earnings, and to withdraw in a year when you may be in a lower tax bracket, can mean more after-tax dollars for your retirement.

Q. How much can I contribute to a traditional IRA?
A. Please refer to the IRA Contribution Limits Table at the top.

Q. Can I still contribute to a traditional IRA if I participate in an employer-sponsored retirement plan?
A. Yes, your participation in an employer sponsored retirement plan will not affect your ability to contribute to a traditional IRA (assuming age and compensation requirements are met). However, higher-income earners will lose their ability to deduct their traditional IRA contributions if participating in an employer sponsored plan.

Q. If I already have a Roth IRA, can I have a traditional IRA, too?
A. Yes, you can. However, the limits on annual contributions described on the previous page apply to any combination of traditional and Roth IRA contributions that you make for the year.

Q. How much can I deduct?
A. If you are single, or married and neither spouse is an active participant in a retirement plan, your traditional IRA contribution is deductible regardless of income. If you or your spouse is an active participant, you may deduct contributions only if your income is below certain limits. Smaller deductions are available if your income is within the phase-out range, which is determined by your filing status. Higher-income earners with retirement plans may still contribute, but deductions are not available if income is over the phase-out range. If you have questions about your specific tax situation, please consult your tax advisor for an interpretation of how these rules apply to you.

Q. Can I get any tax credits for making IRA contributions?
A. You may be able to receive a tax credit for making contributions through tax year 2006. The full credit is 50 percent of the first $2,000 of contributions. The full credit is available for joint filers who have joint modified adjusted gross income (MAGI) up to $30,000, heads of households with MAGI up to $22,500, or other filers with MAGI up to $15,000. Smaller tax credits are available for joint filers with MAGI up to $50,000, heads of households with MAGI up to $37,500, or other filers with MAGI up to $25,000.

Q. Will I owe income taxes when I withdraw from my traditional IRA?
A. Yes, you will owe income taxes when you withdraw from your traditional IRA. However, if you make nondeductible contributions to a traditional IRA, a portion of each withdrawal will be treated as the nontaxable return of these contributions.

Q. If I make an early withdrawal from my traditional IRA before age 59-1/2, do I pay a penalty?
A. In general, you must pay a ten percent tax on early distributions or withdrawals before age 59-1/2. But the early distribution tax does not apply in the following situations:

  1. Amount is rolled over or directly transferred to another traditional IRA
  2. Amount is properly converted to a Roth IRA
  3. Withdrawal of an excess contribution before the tax return is due
  4. Withdrawal of an excess contribution after the filing deadline if certain conditions are met
  5. Payment is made to your beneficiaries after your death
  6. Withdrawal of up to $10,000 is for first-time home purchase
  7. Amount is used to pay for qualified post-secondary education expenses
  8. Amount is used to pay for medical expenses in excess of 7.5% of adjusted gross income (AGI)
  9. Amount is for pre-59-1/2 periodic payments
  10. Distribution is to an owner who is disabled (as defined by the IRS code)
  11. Distribution is for medical insurance premiums during unemployment that lasts 12 weeks or longer

Q. When must I begin taking distributions from my traditional IRA?
A. You must begin taking required minimum distributions from your traditional IRA at age 70-1/2. The minimum distributions each year will be computed using an IRS formula. You are allowed to delay the first year’s payment until April 1 of the following year, but you will receive two year’s worth of payments in your 71-1/2 year if you choose to delay.

Q. Can I move funds from a qualified retirement plan to a traditional IRA?
A. If you are entitled to receive an eligible rollover distribution from an employer’s plan, you can continue deferring taxes by moving the money into a traditional IRA. The best way to do this is to inform the plan administrator that you want the funds moved directly to your traditional IRA in a direct rollover. The plan administrator will inform you before making an eligible rollover distribution.

Q. Can I move money from a traditional IRA to a Roth IRA?
A. You can move money from your traditional IRA to a Roth IRA if your adjusted gross income for the year is $100,000 or less, and you are either single or married filing a joint tax return. In the year you convert, you will have to pay federal income taxes on the amount that you move, except the portion that is treated as the return of your nondeductible contribution. You may also be subject to state income taxes.

Q. What happens to my traditional IRA after my death?
A. You may designate one or more beneficiaries to receive your IRA after your death. If your spouse is your beneficiary, he or she may directly transfer your traditional IRA to his or her own IRA tax-free. In addition, all beneficiaries have the option of taking a lumpsum payment, and in most cases, they will be able to take periodic payments over a number of years. Any tax-deferred money in your traditional IRA at the time of death will be taxed when it is distributed to your beneficiaries.