Madison Credit Union offers two types of IRAs (Traditional and Roth) as well as a Coverdell Educational Savings Account. Traditional and Roth IRAs both offer different tax advantages and have different restrictions for withdrawals. Listed below are some of the frequently asked questions for each IRA type. Madison Credit Union staff can give you information on different IRA options to help you make informed choices, however, MCU cannot offer tax advice. For information on tax law, please consult your tax advisor.
Traditional IRA
A traditional IRA is an individual retirement account that lets you save for retirement with tax-deferred earnings and the possibility of tax-deductible contributions.
Eligibility
Any member under age 70½ who earns compensation or is filing jointly with a spouse earning compensation or has received a disbursement from a qualified retirement plan.
Maximum Annual Contribution
A maximum contribution of $5,500 is allowed for members 49 and below. Members age 50 and better may contribute $6,500.
Tax Advantages
Earnings are tax deferred until withdrawn. Contributions may be tax deductible.
Withdrawal Restrictions
Prior to age 59½ a withdrawal is subject to being included in gross income plus a 10 percent additional tax penalty. Withdrawal penalties can be waived in only the following situations: qualified higher education expense; first time home purchase; age 59 ½ or better; disability; certain medical expenses; payment to beneficiaries upon owner’s death; payment of health insurance while unemployed 12 weeks or longer.
Roth IRA
A Roth IRA is an individual retirement arrangement that offers different tax incentives than a traditional IRA to boost your retirement savings.
Eligibility
Any member who has income from compensation up to $112,000 (single filers) or $178,000 (joint filers).
Maximum Annual Contribution
A maximum annual contribution of $5,500 is allowed for members aged 49 and under. Members age 50 and better may contribute $6,500.
Tax Advantages
Earnings are tax free if the account is open for five years or more and withdrawn for a qualified reason: age 59½, disability, death, first time home purchase. Not required to start withdrawals at age 70½.
Withdrawal Restrictions
Regular contributions can be withdrawn tax free and penalty free at any time after the account is open for five years or more and withdrawn for a qualified reason: age 59½, disability, death, first time home purchase.
| IRAs - Traditional, Roth & Educational | ||||
|---|---|---|---|---|
| Minimum to Open | Minimum Balance for Dividends | Dividend Rate | Annual Percentage Yield |
|
| IRA Shares | $5 | $100 | 0.15% | 0.15% |
| 1 Year Certificate | $500 | $500 | 3.95% | 4.01% |
| 1.5 Years (18 Months) | $500 | $500 | 2.50% | 2.52% |
| 2.5 Years (30 Months) Certificate | $500 | $500 | 2.50% | 2.52% |
