Individual Retirement Accounts

Meadville Area Federal Credit Union IRA's


IRA Information

IRA stands for Individual Retirement Account or Individual Retirement Arrangement. The individual retirement account is a personal, tax-deferred account for people who are employed, and their spouses.

It allows the owner to save for retirement, and depending on the type of IRA chosen, may be deductible on their annual income taxes. If a member is not covered by a qualified retirement plan at work (or if covered, he/she falls below a certain income level), the IRA contribution may be fully or partially tax-deductible.

IRA Types and Contribution Eligibility

Roth IRA – A government savings plan that offers tax advantages for individuals to set aside money for retirement. Contributions are made with after-tax dollars.

Account balances compound tax-free. Funds that are withdrawn are tax-free if account is five years old and the account owner is over 59 ½.

2012 IRA Contribution and Deduction Limits

Traditional IRA – A government savings plan that offers tax advantages for individuals to set aside money for retirement. Contributions are made with pre-tax dollars.

2012 Combined Traditional and Roth IRA Contribution Limits

If you are under 50 years of age at the end of 2012: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2012. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).

If you are 50 years of age or older before the end of 2012: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2012. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.

Account balances compound tax-free until funds are withdrawn.

IRA Withdrawals

Withdrawals can be made at any time, but the tax consequences depend on the type of IRA, owner's age, and reason for withdrawal. Please seek the advice of a tax advisor for the implications for your particular situation.

IRA Rollovers and Direct Transfers

Members can rollover or direct transfer monies from other IRAs here. There are rules governing each transfer, so please make sure to consult with a tax advisor before assuming these transactions can be completed.

Coverdell Education Savings Accounts – A Coverdell Education Savings Account (ESA) is an account created as an incentive to help parents and students save for education expenses. A beneficiary is someone who is under age 18 or is a special needs beneficiary.

There are two yearly limits:

  1. One on the total amount that can be contributed for each designated beneficiary in any year, and
  2. One on the amount that any individual can contribute for any one designated beneficiary for a year.

Limit for each designated beneficiary. For 2010, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources.

Coverdell ESA Contributions at a Glance

Question Answer
Are contributions deductible? No.
What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary.
What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary.
What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute.
Can contributions other than cash be made to a Coverdell ESA? No.
When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary.