IRAs

It is time to start saving for retirement with one of our retirement plans.  Citizens State Bank of Loyal has a retirement plan to help you plan for your future.

Traditional IRA

A Traditional IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement.  If you are younger than age 70 1/2 and earn wages you are eligible to establish and make contributions to a Traditional IRA Retirement account.  Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances and generally, amounts in your Traditional IRA (including earnings and gains) are not taxed until distributed.

Please click here to view the contribution and deductibility limts.

Roth IRA

  • Earnings on a Roth IRA are tax-free, however may be withdrawn only if they satisfy a five-year waiting period AND any one of the following criteria is met:
    1.  Reaching age 59 1/2
    2.  Disability
    3.  First-home purchase
    4.  Death (as payment to beneficiaries)
  • Contributions may be withdrawn tax- and penalty-free.
  • Distributions are not required to be taken at age 70 1/2.
  • Contributions are not tax-deductible.

Conversions (Traditional to Roth IRA)

A conversion is a taxable movement of cash or other assets from a Traditional IRA or a savings incentive match plan for employees (SIMPLE) IRA to a Roth IRA.  One common reason why IRA holders do conversions is that they desire the tax benefits of a Roth IRA.  Another benefit to converting is the ability to avoid required minimum distributions.  Whatever the reasons, a conversion allows the opportunity to move such assets into the Roth IRA.

Starting January 1, 2010, the Roth IRA conversion eligibility restrictions were eliminated.  Most investors are now eligible to convert to a Roth IRA (the annual contribution income restrictions will still apply).

Investors who convert in 2010 have the option to spread their tax liability by including half of the conversion amount in their 2011 tax return and half in their 2012 tax return.  In subsequent years, they will have to pay all taxes the year they convert.

The decision to convert needs to be made with care and should include a consultation with your tax advisor about your particular situation.

Coverdell Education Savings Account

A Coverdell Education Savings Account is a nondeductible account that features tax-free withdrawals for a very specific purpose-a child’s education expense.  Distributions are penalty free and Federal income tax free when used to pay for a qualifying education expense.  Contributions to a Coverdell are not deductible, but amounts deposited in the account grow tax free until distributed.  This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses.  This account provides an incentive to help parents and students save for education expenses.

IRS Publication

Click here to view the IRS Publication.