This page is for informational purposes only, and 1st Credit Union
of Gainesville is not providing any tax or investment advise,
members should consult his or her own tax advisor for the potential
tax related consequences of opening an IRA account.
An individual retirement arrangement (IRA) is a personal savings
plan that offers a member tax advantages to set aside money for
their retirement or plans for certain education expenses. Two
advantages of an IRA are:
- Members may be able to deduct their contribution in whole
or in part, depending on the type of IRA and a member’s
- Generally, amounts in the IRA, including earnings and
gains are not taxed until distributed, or in some cases, are not
taxed at all if distributed according to the rules.
1st Credit Union currently offers two different traditional IRA
accounts. Check back for additional IRA solutions coming soon.
- Traditional IRA Savings
- Traditional IRA CD
What is a Traditional IRA?
A Traditional IRA was the original IRA. The Traditional IRA is
the term for a regular IRA available to those under age 70 ˝ who
have earned income (i.e., job compensation). Under current rules,
Traditional IRA contributions of $3,000.00 (3,500.00 for taxpayers
who are 50+ years old) are fully deductible for individuals with
adjusted gross income of $95,000.00 or less (married couples with
AGI under $150,000.00). Taxpayers can contribute to their
Traditional IRA through age 70.
Deductible IRA contributions and the earnings they accrue are not
subject to federal or state income tax until the funds are withdrawn
or distributed from the IRA account. Distributions after age 59 ˝
are fully taxed as ordinary income. Distributions prior to age 59 ˝
are also subject to a 10% penalty for early withdrawal, unless the
withdrawal is because of:
- death or disability of the IRA holder
- Rolled over to another IRA with a valid IRA rollover,
- Converted to a Roth IRA with a valid conversion
- Taken to pay for qualifying medical expenses or health
insurance for unemployed individuals,
- Taken to pay first- time home purchase expenses or the higher
education of member, spouse, child or grandchild,
- Part of a series of substantially equal periodic payments, or
- Due to an IRS levy
After age 70 ˝, traditional IRA owners must take annual
contributions (minimum required distribution-MRD) based upon
actuarial life expectancies. These distributions are fully taxable
as ordinary income. Failure to take a required minimum distribution
results in severe penalties.