Traditional and Roth IRAs

Central National Bank proudly offers its customers the opportunity to invest in IRAs.  IRAs can focus on gaining competitive returns and/or limiting risk for more conservative investors. 

Traditional

A Traditional IRA can have special tax advantages that help you plan for retirement. Because of its flexibility, you may be able to deduct all or part of a Traditional IRA. It’s best to ask your tax advisor which circumstances apply to you. Another benefit of the Traditional IRA is that it is not taxed until it is distributed. Here are some additional highlights of a Traditional IRA:

• Contributions may be tax deductible depending on your income.
• Distributions can begin at age 59 ½ without penalty.  Minimal distributions are mandatory at age 70 ½.
• Taxes on earnings are deferred until they withdrawn from the IRA.
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.).
• There are no income restrictions on contributions, but there are on deductibility.
• Withdrawals before the age of 59 ½ may result in a 10% IRS penalty.
• 2012 Contributions are limited to $5,000 (or amount of earned income, whichever is less) plus an additional $1,000 if you are over the age of 50.
• You can roll your employer’s retirement plan into a Traditional IRA without taxation if you change jobs or retire.

Roth

A Roth IRA is different from a Traditional IRA in that you receive no tax deduction for contributions to a Roth.  The Roth IRA, however, has the advantage of tax-free withdrawals after 5 years from the initial contribution and reaching age 59 ½.  The Roth IRA is great for those who have a long time before retirement to allow the investments to grow.  The Roth is, however, restricted to those who do not have high incomes.  Check with your tax adviser to see if you qualify before opening a Roth IRA.  Additional highlights of a Roth IRA:

• Contributions are NOT tax deductible.
• Distributions of income can begin at age 59 ½ without penalty.  Distributions of contributions can be taken after 5 years, regardless of age.  There are NO minimal distributions required at age 70 ½.
• Earning are not taxed at withdraw after 5 years and age 59 ½.
• Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits, etc.).
• There are income restrictions on contributions.
• Withdrawals before the age of 59 ½ may result in an IRS penalty.
• 2012 Contributions are limited to $5,000 (or amount of earned income, whichever is less) plus an additional $1,000 if you are over the age of 50.