Individual Retirement Accounts (IRAs)
A-K Valley offers a wide variety of IRA Accounts to best serve our members needs. We offer the Traditional IRA, the Roth IRA, and Coverdell Educational Savings Account ( Education IRA). We also offer IRA certificates at great rates with terms of 6 months,1,2,3,4 and 5 years.
Traditional IRA
A Traditional IRA is a special type of savings plan designed to help the owner save for retirement. The Traditional IRA offers tax-deferred earnings and the possibility of tax-deductible contributions.
The Traditional IRA has always been a great savings vehicle. It is now even better. These accounts are still available to anyone under age 70 1/2 who has earned income. Contributions are tax deductible for more people now. Check with your tax consultant to determine your eligibility. Income tax on the account's earnings is deferred until the funds are withdrawn.
The new contribution amount is $4000.00 per year per owner, with catch-up contributions of $500 per year for owners who reach age 50 by December 31, 2005.
Even when contributions aren't deductible at the time you make them, the advantages of tax-deferred compounding have always made this account an excellent choice to outperform taxable, non-IRA investments over the long term.
Roth IRA
The Roth IRA, named for Senator William Roth, Chairman of the Senate Finance Committee and a long-time IRA supporter, can only receive nondeductible contributions. The greatest point of interest for the Roth IRA is that withdrawals, including earnings, can be deducted tax free if you conform to the provisions to receive the tax free advantage.
The Roth IRA is available to married couples filing jointly with modified adjusted gross incomes (MAGI) up to $150,000.00 and single filers with MAGI up to $95,000.00. Tax payers can contribute to either a traditional IRA, a Roth IRA, or both, but aggregate contributions between the two may not exceed $4,000.00 per owner. The Roth IRA also has a $500.00 per year catch-up contribution allowance for owners who reach age 50 by December 31, 2005.
Members can also convert a Traditional IRA to a Roth IRA, provided they meet the income limits and pay taxes on any deductible contributions and earnings.
Unlike deductible IRAs, the Roth IRA has no requirement to begin taking distributions at age 70 1/2. This gives you the ability to pass on your Roth IRA tax free to the person or persons you name as the beneficiaries of your account.
Coverdell Education Savings Accounts
Formerly the Education IRA, a Coverdell Education Savings Account (ESA) is an account with the specific purpose to help pay the higher - education expenses of a child under the age of 18 named on the account. While contributions to the account will not be tax deductible, earnings will be tax free if used to pay for "qualified higher education expenses." Another Benefit, is that contribution s can now be made for the prior year up until April 15th.
A Coverdell ESA is available to you if you file jointly and have a combined income of $190,000.00 MAGI, with a Phase-out Range from $190,000 to $220,000. The single filer income limit is $95,000.00 MAGI, with a Phase-out Range from $95,000 to $110,000. Contributions to a Coverdell ESA are not deductible, and are limited to a maximum of $2000.00 per child per year. In addition, you can contribute to a Coverdell ESA in any year that a contribution to a qualified state tuition program is made.
Coverdell ESA is a great savings vehicle even if you are not sure whether your son or daughter will pursue higher education. That's because money can be rolled over from one child's account to another. For more information please contact our office to speak to an IRA Specialist.
