Traditional IRA

ABE Federal Credit Union offers an insured Individual Retirement Account that invests only in a portfolio of US Treasury instruments, jumbo bank certificates, and loans to members.  These are the same types of secure investments that have developed our Credit Union into a financially sound institution.

Dividends Are Tax Deferred :  
Your Credit Union will pay as high a dividend rate as possible on IRAs, competitive with the interest rates paid on similar accounts at other financial institutions.  The dividend rate on IRAs at your Credit Union will be based on the earnings of the Credit Union and may fluctuate according to the prevailing marketplace conditions.  Dividends paid to Individual Retirement Accounts are generally tax deferred until you begin withdrawals.

Contributions :  
At your Credit Union, there is no minimum contribution.  You can contribute any amount up to the lesser of $4000.00 or 100% of compensation received for any year.   Compensation includes wages, salary, commissions, and fees.  The contribution may be eligible for deduction from income at tax reporting time.  Check with your tax advisor.  These limits apply to a husband and wife, each of whom works and meets the IRA qualifications.  In such a case, the maximum deduction available to the couple is $8,000.00 per year on a joint return.  However, each spouse must maintain a separate IRA.  If you are over age 50, you may qualify for an additional catch-up contribution.

The contribution limits for married couples are equal to two times the above limits in each plan year.  For example, in 2005, a married couple, both of whom are over age 50, may contribute a total of $9,000.00.

Spousal IRA: 
If you are employed and your spouse is not, you may maintain a separate Spousal IRA for your non-working spouse in addition to your own IRA.  However, the maximum amount allowed as a deduction per year may not exceed $8,000.00 or 100% of compensation, whichever is less. To take the deduction for a spousal IRA, a joint return must be filed.

Making Contributions: 
An IRA tax deduction for any given year may be taken for contributions made to your IRA from the beginning of that year through the due date for the income tax returns, April 15, of the following year.  Contributions to your IRA account can be made in lump sum(s) or, if more convenient, throughout the year via systematic payroll deductions.  Simply indicate the amount you wish to contribute to your IRA on each regular payday.

Special Tax Considerations: 
There can be significant tax savings or material tax penalties in connection with participation in an IRA program.  Always check with your tax planner or advisor when contemplating contributions or withdrawals.

Reporting Requirements: 
The Credit Union is required by law to furnish you with an annual report on your IRA by May 31 of each year, for contributions made for the previous year.

Borrowing: 
You can borrow money to make your IRA contribution as long as your IRA is not pledged as security.  Pledging the assets of the IRA account as collateral for a loan is considered the same as withdrawal from an IRA for tax purposes.

Early Withdrawal Excise Tax: 
IRAs are intended to build savings for retirement.  Withdrawals prior to age 59½ are penalized by a 10% Excise Tax.  You are responsible for indicating your eligibility when requesting the withdrawal and stating the purpose if the withdrawal is before age 59½.  Your Credit Union is required to report all withdrawals to the Internal Revenue Service.

Distribution: 
When you begin receiving payments/distributions from your IRA, after age 59½, the distributions are subject to tax as ordinary income.  You must begin withdrawing from an IRA by age 70½.  You can elect to receive your distribution in either a lump sum payment or payments over any period up to the life expectancy of you and your spouse.  For other than lump sum distributions, the IRS requires that payments be in substantially equal amounts per period.  IRS life expectancy tables must be used in arranging payment over the expected life.

Rollovers: 
You may receive funds from an existing IRA and roll them over tax free into an IRA roll-over account or amounts can be transferred for you.  The rollover must be completed in compliance with strict rules in order to avoid penalties.