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Explore Your IRA Options for Retirement Planning

Through Individual Retirement Accounts (IRAs), Empeople Credit Union empowers you to take control of your financial future. We offer the flexibility and security you need to achieve your long-term goals, whether you’re planning for your retirement or your child’s education. Various IRA options are available, including Traditional IRAs, Roth IRAs, and Coverdell IRAs.

How do the options differ from one another, and why would you choose one over the other? To understand each option, let’s start from the basics.

Contributions to traditional and Roth IRAs must come from earned income – compensation from working.

What is a Traditional IRA?

A Traditional IRA allows you to make pre-tax contributions and potentially lower your taxable income in the year of contribution. Traditional IRAs are tax-deferred, meaning you don’t pay taxes on the money you put into the account, making it a pre-tax account. However, you will pay taxes on the distributions you take from the account in retirement. At that point, your withdrawals are taxed as ordinary income.

Key Features:

• Pre-tax and after-tax contributions
• Tax-deferred growth
• Begin withdrawals at age 59 ½ without penalty
• Required minimum distributions
  • Born 1/1/1951 to 12/31/1959 begin at age 73
  • Born on or after 1/1/1960 will begin at age 75

Traditional IRAs are ideal for those who anticipate being in a lower tax bracket during retirement or who want to reduce taxable income now.

What is a Roth IRA?

Unlike a traditional IRA, a Roth IRA requires after-tax contributions, meaning your contributions are made with income that has already been taxed. One of the big advantages of a Roth IRA is that all future qualified withdrawals are tax-free in retirement.

Key Features:

• After-tax contributions
• Tax-free withdrawals in retirement
• Flexible withdrawal options for contributions (not earnings)
• No required minimum distributions (RMDs) during the account holder’s lifetime
• 2024 contribution limit is $7,000 or $8,000 for 50 and over
• Roth IRA income limits are less than $161,000 for single tax filers and less than $240,000 for those married filing jointly

Roth IRAs are ideal or attractive to those anticipating a higher tax bracket during retirement or those seeking tax-free growth potential.

What is a Coverdell (Education Savings Account)?

A Coverdell IRA is designed specifically for education expenses. While your contributions are not tax-deductible, they do grow tax-free, and withdrawals are tax-free, too, when used for qualified education expenses such as tuition, room and board, books, etc. A Coverdell IRA can be used for elementary, secondary, and higher education. Lastly, the beneficiary of a Coverdell ESA can be anyone under the age of 18. Once they reach 18 you can no longer make contributions on their behalf.

Key Benefits:

• Contributions are not tax-deductible
• Tax-free growth
• Tax-free withdrawals for qualified education expenses
• Used for a variety of education expenses

Choosing the right IRA depends on your financial situation, goals, and preferences. Each option provides unique advantages to help you build a stronger financial future. Our dedicated team is ready to explore your options and start planning for your tomorrow, today.

Fill out the form below, and one of our team members will contact you. Or, call us today at (800) 338-6739.