An individual Retirement Account (IRA) is one of the best ways
to save for your future, regardless of income. Recent changes in
the IRA tax code have made this investment better than ever...and
PFCU offers a full range of IRA choices:
Roth IRA
There is no tax deduction when you open the
Roth IRA... but when distribution begins at retirement, it is tax
free! Many other benefits also apply:
After five years, withdrawal of the principal and earned dividends
is tax free for those age 59 1/2 years or older.
Even if you have a pension plan your Roth IRA distributions
will be TAX FREE when made at retirement.
The Roth IRA offers a variety of penalty-free withdrawal options
BEFORE regular distribution begins.
Coverdell Education Savings Account (Formerly Education
IRA)...
This special savings program has been revised
to offer MORE tax-advantaged education benefits beginning in 2002.
A non-deductible account, it helps parents and others save for a
child’s elementary- and secondary-school education. Distributions
are tax free and penalty free if used for qualified education purposes.
And, as of 2002, the annual contribution limit has been increased
to $2,000 per child (regardless of the number of contributors).
Improved Traditional IRAs
Savings in this IRA are taxed as regular income
when distribution begins at retirement, usually at a lower, “retirement
level” bracket. Contributions are wholly or partially tax-deductible,
based on income and other factors. All earned dividends are tax-deferred,
regardless of income!
Traditional IRA Contribution Limits Increase Beginning
in 2002!
Recent legislation has increased annual Traditional
IRA contributions as follows:
Year 2002 - 2004 $3,000
Year 2005- 2007 $4,000
Year 2008 & thereafter $5,000
Those age 50 or older can contribute an additional $500 per
year!
Ask your tax advisor for up-to-date IRA details, and a recommendation
for which IRA is best for you. Then see PFCU for assistance opening
your account. Just stop by or call any office.
To open a PFCU IRA, please call (626) 440-7000, Ext. 317.
Use our Retirement Calculator to see
how much you need to save to retire!
IRA COMPARISON TABLE
Traditional IRA
Roth IRA
Coverdell ESA (Formerly
Education IRA)
Qualifications
Must have earned income and
not have reached age 70 1/2 by the end of the year.
Must have earned income. There
are no age restrictions.
The designated beneficiary
must be an individual under the age of 18. Beginning in 2002,
the age 18 limitation will not apply to any designated beneficiary
with special needs.
Maximum Contributions
Taxable years beginning
In 2002 through 2004... $3,000
In 2005 through 2007... $4,000
In 2008 and after... $5,000*
Taxable years beginning
In 2002 through 2004... $3,000
In 2005 through 2007... $4,000
In 2008 and after... $5,000*
Taxable years beginning
In 2002 and after... $2,000 per beneficiary. Contributions do
not count against the limits for IRAs
Yes. Contributions up to the
limit are full tax deductible if you are not an active participant
in a retirement plan. Otherwise, phaseout rules (pop-up box
A) apply.
No.
No.
Penalties for Early
Withdrawal
None if:
• Over 59 1/2
• Death or disability
• Qualified medical expenses
• Certain health insurance
• Qualified college expenses
• 1st time home purchase
(up to $10,000)
• Due to IRS levy
None if:
• Over 59 1/2
• Death or disability
• Qualified medical expenses
• Certain health insurance
• Qualified college expenses
• 1st time home purchase (up to $10,000)
• Due to IRS levy
None if:
• For payment of qualified education
expenses
Required Distributions
Must begin by April following
year participant turns 70 1/2.
Only after death of the
participant.
Must be complete 30 days after
beneficiary reaches age 30 or dies.
