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Individual Retirement Accounts (IRAs)

Individual Retirement Accounts offer another vehicle to save for your future with varying tax benefits.

 

Options include:

Traditional IRA
Roth IRA
Coverdall Educational Savings Accounts

 

Madison Credit Union offers two types of IRAs (Traditional and Roth) and Coverdell Educational Savings Accounts. 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. 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.

Who is eligible?

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.

How much may I contribute annually?

$5,500. Members age 50 and better may contribute $6,500.

What are the tax advantages?

Earnings are tax deferred until withdrawn. Contributions may be tax deductible.

When can I withdraw without restriction?

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.

Who is eligible?

Anyone who has income from compensation up to $112,000 (single filers) or $178,000 (joint filers).

How much may I contribute annually?

$5,500. Members age 50 and better may contribute $6,500.

What are the 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Earnings are tax free if the account is open for five years or more and withdrawn for a qualified reason: age 59½ disability, death, first time home purchase.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.

When can I withdraw without restriction?

Regular contributions can be withdrawn tax free and penalty free at any time. After the account is open for five years or more and withdrawn for a qualified reason: age 59½ disability, death, first time home purchase.

Coverdell ESA

A Coverdell Educational Savings Account can help you save for a child’s education expenses, such as tuition, fees, supplies, equipment, and, in some cases, room and board.

Who is eligible?

Anyone who has income from compensation up to $95,000 (single filers) or $190,000 (joint filers).

How much may I contribute annually?

$2,000 per child.

What are the tax advantages?

Withdrawals are tax free for certain education expenses: tuition, books, computer equipment, and technology required for elementary, secondary, and post-secondary education.