 | Mark Kolarik is the President of the Kansas Teachers Community Credit Union, located in Pittsburg, KS, since 10-2002 and is a board member of the Kansas Corporate Credit Union located in Wichita, KS . He has been employed in the financial service industry for the last 31 years, having worked in several credit unions for 21years and 10 years in the banking industry. He holds a Bachelor of Business Administration degree from the University of Wisconsin-LaCrosse and is a Certificated Credit Union Executive. |
Banking & Finance
2013-02-01 09:24:27
Should I consider an IRA?
Q-I may be interested in opening an Individual Retirement Account (IRA) at my financial institution. Can you provide me with information about an IRA account?
A-Most credit unions and banks offer IRA accounts. An IRA is an excellent tool for retirement savings. Unlike most investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax deferred or tax free. IRA accounts must be opened and funded by April 15th, the tax deadline to receive a tax deduction on the previous year’s earning.
To be eligible for a Traditional IRA, you must be under the age of 70 ½ and must have some form of compensation to contribute. The annual contribution limit is $5,500 for 2013. Contributions are tax deductible if you are not an active participant in an employer retirement plan. Deductibility may be limited if you or your spouse are an active participant in an employer retirement plan.
An owner of an IRA must be 50 ½ before making a withdrawal from a traditional IRA without incurring an additional 10% tax penalty. There are several exceptions that allow an owner to avoid the tax penalty for early withdrawals such as, qualified higher education expenses, certain qualified first time home buyer amounts, significant unreimbursed medical expenses among other exceptions. Earnings are taxed only upon withdrawal or distributions.
Traditional IRAs are subject to a minimum required distribution rule when the owner reaches age 70 1/2/. The minimum required distribution amount is determined by using a life expectancy table and the account balance. Calculate the annual estimated dollar distribution amount needed to bring the account to zero when the owner reaches the life expectancy age.
IRA accounts grow by using compound interest over an extended period of time, meaning that accumulated interest is added to the principal each time in calculating earnings. Over the course of 20 or more years, these accumulations can be substantial. To obtain more information about IRAs go to www.irs.gov.
