Ag Banking

Individual Retirement Account (IRA)

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Traditional IRA

Contributions to a Traditional IRA may be tax-deductible (subject to eligibility) and will grow tax-deferred since earning and gains are not taxed until they are withdrawn.

Roth IRA

Contributions to a Roth IRA are made with after tax dollars. Money you withdraw will generally be tax free (subject to certain requirements).

To compare details of Traditional and Roth IRAs, click here

Rollover IRA

If you're leaving a job for any reason, a Rollover IRA is a good choice for maintaining the tax-deferred status of your retirement savings, and avoiding penalties and tax consequences.

A Rollover IRA is generally funded by your eligible distributions from a company sponsored qualified retirement plan, such as a 401(k). These funds can be combined with your existing IRA, but it may be best to put them into a separate IRA so you have the option of moving the funds to another employer sponsored plan in the future if the company allows it. (Once you make contributions to a Rollover IRA that are not from a company sponsored plan, you lose the option to move the rollover to another company sponsored plan.)

To open or learn more about the benefits of Individual Retirement Accounts, contact an Eastwood Bank Personal Banker.

Consult your tax or legal advisor to determine which type of IRA is the best for you.

Traditional IRA Roth IRA
Overview

Contributions to a Traditional IRA may be tax-deductible (subject to eligibility) and will grow tax-deferred since earning and gains are not taxed until they are withdrawn.

Contributions to a Roth IRA are made with after tax dollars. Money you withdraw will generally be tax free (subject to certain requirements).
Eligibility to contribute

You can contribute to a Traditional IRA if:

  • You (or your spouse if you file a joint return) received taxable compensation during the year, and
  • You did not reach age 70½ by the end of the year.

You can contribute to a Roth IRA if you have taxable compensation and your modified AGI (adjusted gross income) is less than:

  • $160,000 for married filing jointly or qualifying widow(er).
  • $10,000 for married filing separately and spouses who lived together at any time during the year.
  • $110,000 for single, head of household, or married filing separately and spouses who did not live together at any time during the year.
Contribution limits

Contribution limits for tax years 2006 and 2007 are the lesser of:

  • $4,000 OR
  • Your taxable compensation for the year.

If you are age 50 or older by the end of the tax year (for years 2006 and 2007) you can contribute the lesser of:

  • $5,000 OR
  • Your taxable compensation for the year.

Contribution limits for tax years 2006 and 2007 (subject to eligibility) are the lesser of:

  • $4,000 OR
  • Your taxable compensation for the year.

If you are age 50 or older by the end of the tax year (for years 2006 and 2007) you may be able to contribute the lesser of:

  • $5,000 OR
  • Your taxable compensation for the year.

(The amount you can contribute may be less depending on your income, filing status, and eligibility to contribute to another IRA.)

Tax deductibility of contributions

Contributions to a Traditional IRA may be tax deductible depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits.

Contributions to a Roth IRA are not tax deductible.