What is an IRA?
An IRA (Individual Retirement Account) is a way to save money while benefiting from tax-exempt earnings. In many cases the contributions you make to an IRA are also tax deductible depending on your tax filing status and income levels. There are three types of IRAs: Traditional IRA, Roth IRA and Coverdell Education Savings Account (CESA).
A Traditional IRA is a tax-advantaged arrangement that allows earnings and deductible contributions to grow tax-deferred. That means you don't pay income taxes on the earnings and deductible contributions of your IRA until you begin taking withdrawals, usually after you retire. Traditional IRA holders are required to make a minimum distribution (RMD) after the age of 70 1/2.
A Roth IRA is a newer type of individual retirement arrangement established by the Taxpayer Relief Act of 1997. A Roth IRA allows you to accumulate earnings on a tax-deferred basis and to withdraw earnings tax-free for qualified distributions. Unlike a Traditional IRA, contributions to a Roth IRA are not deductible from your gross income on your federal income tax return. However, since you have already paid taxes on the money you've contributed to the account, contribution dollars can be withdrawn at anytime without tax consequences provided that you meet certain guidelines. Required Minimum Distributions are not required to be taken by Roth IRA holders over the age of 70 1/2 as they are for Traditional IRA holders.
The Coverdell Education Savings Account (CESA) is a way for family members to save for the education expenses of children under the age of 18. It is a trust or custodial account in which contributions grow on a tax-deferred basis and withdrawals are tax free if used to pay for a broad range of educational expenses. ESAs have annual contribution limits and income restrictions.
You should consult a tax professional for limits and deductibility status.
Please contact a Member Service Representative at 503.239.5336 or 800.982.2974 or firstname.lastname@example.org to open your IRA.