Traditional Individual Retirement Accounts (IRAs)
A Traditional Individual Retirement Account (IRA) may provide you significant immediate tax savings, and due to the deferral of all taxes on earnings, the power of compound earnings is strengthened.
You can contribute to a Traditional IRA if you earn compensation and you will not reach age 70½ by the end of the year. Earnings in a Traditional IRA are not taxed until they are withdrawn.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.
With a Traditional IRA:
- Earnings accumulate tax-deferred
- Contributions are tax-deductible if you qualify
The annual contribution limit on a Traditional IRA for someone under age 50 is $5,500. The annual contribution limit for someone age 50 or older is $6,500.
Roth Individual Retirement Accounts (Roth IRAs)
Roth Individual Retirement Accounts (Roth IRAs) offer unique and exciting savings opportunities, and they’ve gotten better over the years. Roth IRAs give many Alabama Credit Union members an easy and safe way to plan for the future.
Unlike traditional IRAs, contributions to a Roth IRA are never tax-deductible. However, the money in your Roth IRA, including earnings, can be withdrawn tax-free. Of course, you must conform to certain tax requirements to get this tax-free advantage.
With a Roth IRA:
- Contributions are allowed at any age
- Qualified distributions are tax-free
- Flexible withdrawal options are available
The annual contribution limit on a Roth IRA for someone under age 50 is $5,500. The annual contribution limit for someone age 50 or older is $6,500.
IRAs at Alabama Credit Union are federally insured up to $250,000 per member (separate from your other Alabama Credit Union accounts) by the National Credit Union Administration and backed by the full faith and credit of the U.S. Government. Accounts are additionally insured to $250,000 per member by Excess Share Insurance. That gives you up to $500,000 in deposit insurance protection for your IRA accounts at Alabama Credit Union.
Are you on the right path for a comfortable retirement? Feel free to contact one of our knowledgable ACU Investment Services Representatives to learn more information about planning for your future.
Educational Savings Accounts
Seeing a child work towards a college degree is a parent's dream. But with rapidly rising costs of higher education, this dream can become a financial nightmare. A Coverdell Educational Savings Account (ESA) can help parents sleep at night. Paying for college has never been this easy.
The benefits of a Coverdell ESA include:
- Unlike state 529 plans, Coverdell ESAs can be used to pay for qualified elementary and secondary education expenses.
- Earnings grow on a tax-deferred basis, and distributions are tax-free if the money is used to pay qualified education expenses.
Contributions to a Coverdell ESA are never tax-deductible. However, a Coverdell ESA offers you the potential for tax-free withdrawals — including earnings. The total contributions each year to a child's Coverdell ESA cannot exceed $2,000. If you're eligible, you can contribute the full amount for each child. For example, if you have three children and each has his or her own Coverdell ESA, you can contribute $6,000 ($2,000 to each ESA).
You can make contributions to a child's Coverdell ESA until he or she reaches the age of 18. This age limit does not apply to special needs beneficiaries. This is a person who requires additional time to complete his or her education because of a physical, mental or emotional condition (including a learning disability).