Discover how to get the most out of your retirement dollars at River Region Credit Union. We offer Traditional, Roth and Education IRAs. Investing in an IRA provides you with the resources you’ll need for retirement as well as flexibility for your changing financial needs.

There are some major differences between the three IRAs. Below the advantages of each IRA are described.

Traditional IRA

  • Offers a tax benefit now as your contributions may be tax-deductible.
  • Earnings grow tax-deferred until you take the money out, at which time it will be taxed as ordinary income.
  • Delaying the taxes on your contributions or earnings helps your money grow faster over time.
  • You can deduct your contributions if you do not participate in a retirement plan at work, or if you do, you meet the income requirements. This can reduce your current taxes which can leave you with more money to save.
  • Can be used to roll over assets from 401(k)s or other pre-tax employer-sponsored retirement plans.

Roth IRA

  • Offers a tax benefit later, as the withdrawals may be tax-free in retirement.
  • Earnings grow tax-deferred until you take the money out, at which time it will be income tax free, if certain requirements are met.
  • More of your money is available to spend in retirement.
  • Contributions are not deductible, however they may be withdrawn at any time free of tax or penalty. This gives you access to the funds should the need arise.
  • Unlike a Traditional IRA, there are no required minimum distributions (RMDs) with a Roth. This means you can leave your money invested beyond age 70 ½, which allows your money to grow throughout your lifetime.

Education IRA

An Education IRA or Coverdell Education Savings Account (ESA) is an account created as an incentive to help parents and students save for education expenses.

  • Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.
  • There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Eligible institutions also include any college, university, vocational school or other post-secondary educational institution.
  • The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits.
  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.

For more details on IRA accounts, eligibility, contributions and withdrawals, contact a Financial Services Officer today!

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