Traditional and Roth IRAs

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Traditional

agriculture lendingA 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  • Taxes on earnings are deferred until they are withdrawn from the IRA.
  • A variety of investments may be purchased with the funds including bonds, stocks, and 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.
  • Contribution limits vary annually; contact one of our investment officers for current information.
  • 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.
  • A variety of investments may be purchased with the funds including bonds, stocks, and certificates of deposits, etc.
  • There are income restrictions on contributions.
  • Withdrawals before the age of 59 ½ may result in an IRS penalty.
  • Contribution limits vary annually; contact one of our investment officers for current information.