IRA Savings Accounts / Certificates

IRA Savings Account

The IRA (Individual Retirement Account) Savings Account is a simple way for members to save towards their retirement through a Traditional IRA, Roth or Coverdell (educational) account. And IRA accounts are insured up to $250,000.

• Access to view your account 24/7 via Online Banking and H.A.L.
• IRA Savings is a required account if the member wants to establish an IRA Certificate
• Minimum balance to open is $500
• When opening the account the member must establish what kind of IRA is being opened (i.e. Traditional IRA, Roth or Coverdell)
• Dividends:
  • Are earned on the days that the account balance is $500 or greater
  • Are paid quarterly using the daily balance method
• Rates are tiered so the greater the balance the higher the rate ($500-$9,999; $10,000-24,999; $25,000-$49,999; $50,000-$99,999; $100,000 and greater)
• Rates are subject to change monthly
• DFFCU contribution and distribution forms are required to be completed and signed prior to conducting in person transactions (deposit, transfer or withdrawal)
• IRS withdrawal penalty of 10% applies on early, unqualified distributions
• Account funds cannot be pledged for loans
• No annual maintenance fee
• Online E-Statement of account

IRA Share Certificate

DFFCU IRA Share Certificates offer you a way to earn a better return for your hard earned retirement funds. The IRA Share Certificate features a fixed-rate for a stated term. This account generally pays the highest dividend rate but does not allow for funds to be accessed prior to maturity. Another great feature, IRA accounts are insured up to $250,000.

• Access to view your account 24/7 via Online Banking and H.A.L.
• Member must have an IRA Savings to deposit dividends from certificate
• Minimum certificate amount is $2,000
• Terms:
  • Less than $10,000- 1 and 2 year maturity
  • $10,000 and greater - 6 month 1, 2, 3, 4 and 5 year maturity
• Rates are based on the term and amount of the certificate
• Monthly dividends are transferred to the IRA Savings account
• Certificates automatically renew, notice is mailed to the member prior to maturity
• Early withdrawal penalties apply and are based on Share Certificate term
• Terms of 24 months or less; all dividends earned (up to 90 days dividends); with a minimum of 7 days dividends for withdrawals made within the first 7 days
• Terms greater than 24 months; 2% of the principal balance in the account at the time of the withdrawal; penalty applies even if the dividends have not been earned. Penalty will be deducted from the principal
• IRS withdrawal penalty of 10% applies on early, unqualified distributions
• Each of the following DFFCU relationships adds an additional .10% on the stated certificate rate: (1) loan balance greater than $5,000; (2) checking account; (3) direct deposit; (4) MasterMoney® Debit Card; (5) DFFCU VISA® Credit Card
• Account funds cannot be pledged for loans
• Online E-Statement of account

SECTION 1: IRA OVERVIEW

	Traditional	Roth	ESA - Coverdell
Who can contribute?	Anyone with earned compensation and under age 70.5	Anyone with earned compensation MAGI limitations apply	Anyone MAGI limitations apply for contributions to ESA Account
How much can I contribute annually?	2008 - 2010: $5,000 Catch up provisions for age 50 and older is $1,000 (2007 - 2010)	2008 and after: $5,000 Catch up provisions for age 50 and older is $1,000 (2007 -2010)	$2,000 for the benefit of a child up to the age of 18; once the child turns age 18, no additional contributions can be made
Are contributions tax deductible?	Tax-deductible (deduction may be reduced or eliminated based on MAGI, pension plans, etc.)	No	No
What are the tax advantages?	Earnings grow tax-deferred until withdrawn Contributions may be tax deductible	Earnings are tax free and penalty free for qualified distributions No required minimum distributions	Tax free withdrawals for qualified education expenses
When can I withdraw without penalties?	Qualified higher-education expenses First-time home purchase (up to $10,000) Age 59 1/2 Disability Qualifying medical expenses Payment to beneficiaries upon the owner's death Payments of health insurance premiums while unemployed for 12 weeks or longer	Regular contributions can be withdrawn tax-free and penalty- free at any time Earnings are tax & penalty free after meeting the 5-year test and one of the following: Attain age 59 1/2, Death Disability First-time home buyer (up to $10,000) Qualified medical, health insurance or education expenses	Withdrawals are tax-free and penalty free for qualified expenses Funds can be transferred from one child's account to the account of another child in the family under the age of 30
Who owns and has access to my IRA account?	The account must be set up with you as primary owner and only you have access to the IRA account	The account must be set up with you as primary owner and only you have access to the IRA account	The responsible individual (parent or legal guardian) has access to Coverdell The child is the ESA beneficiary
When do I have to take distributions?	At age 70 1/2	Never	By age 30 (can be transferred to eligible family member under the age of 30)
Contribution deadlines?	April 15 of the following year	April 15 of the following year	April 15 of the following year

Roth IRA

The Roth IRA allows members to deposit after-tax dollars, accumulate interest tax-free, and take qualifying withdrawals without tax consequences.

• Individual ownership only; beneficiaries allowed
• Funds can be deposited into the IRA Savings or into an IRA Share Certificate (after IRA Savings has been established)
• Annual Roth IRA contribution limits for individuals is $5,000
• Contributions are limited to 100% of earned compensation or the annual contribution limit (whichever is less); reduced by amount contributed to Traditional IRA
• Contribution limitations are double for married couples filing taxes jointly. If only one spouse earns compensation an additional contribution up to the contribution limit can be made into a spousal IRA (as long as earned compensation is equal to or greater than the aggregate IRA contributions)
• Catch-Up Provisions: Persons age 50(+) can contribute an additional $1,000
• Contributions allowed up to MAGI limits:
  • Single filers - up to $101,000
  • Joint filers - up to $159,000
• Online E-Statement of account

Conversion from Traditional to Roth IRA restrictions apply

Traditional IRA

An Individual Retirement Account (IRA) allows individuals, whether covered by an employer-sponsored pension plan or not, to save money for use in retirement.

• Individual ownership only; beneficiaries allowed
• Funds can be deposited into the IRA Savings or into an IRA Share Certificate (after IRA Savings has been established)
• Members may make contributions if they are under the age of 70 1/2 with earned compensation
• Annual Traditional IRA contribution limits for individuals is $5,000
• Contributions can be made for up to the lesser of the annual contribution limit or 100% of earned compensation; reduced by amount contributed to Roth IRA
• Contribution limitations are double for married couples filing taxes jointly. If only one spouse earns compensation an additional contribution up to the contribution limit can be made into a spousal IRA (when earned compensation is at least equal to aggregate IRA contributions)
• Catch-Up Provisions: Persons age 50(+) can contribute an additional $1,000
• MAGI limits apply only for tax deductibility
  • Single filer: up to $53,000 with a partial deductibility allowed up to $63,000
  • Joint filer: up to $85,000 with a partial deductibility allowed up to $105,000
• Distribution Information:
  • IRS withdrawal penalty of 10% applies on early, unqualified distributions
• Online E-Statement of account

Age of the owner and the reason for the withdrawal determines taxable status

Coverdell Savings Account

The Coverdell Educational Savings Account (ESA) allows members to contribute to an account on behalf of a child to pay for elementary through college or trade school.

• Custodian controls the account; account is held in the name of the designated beneficiary
• Funds can be deposited into the IRA Savings or into an IRA Share Certificate (after IRA Savings has been established)
• Funds can be rolled over to the ESA of another individual within the family under age 30 if not used by the original individual named beneficiary
• Contributions can be made for an individual up to their 18th birthday (does not apply to special needs beneficiaries)
• Maximum annual contribution is $2,000 for any one designated beneficiary
• Funds may come from multiple parties (such as father, grandparents, etc.)
• Withdrawal may be taxed if funds are used for non-qualified educational expense
• MAGI limits apply for contributors to ESA Account
  • Single filer: up to $95,000 with a partial contribution allowed up to $110,000
  • Joint filer: up to $190,000 with a partial contribution allowed up to $220,000
• Distributions allowed for qualified expenses, such as; tuition, academic tutoring, books, room and board and supplies. Qualified schools include:
  • Colleges, universities, and vocational schools
  • Elementary and secondary schools (kindergarten through grade 12)
  • Schools may be public, private or religious schools
• Online E-Statement of account.

IRA Rollover, Transfer and Conversion Information

• Rollover is paid directly to the account owner, from a qualified retirement plan or IRA, that must be deposited into another qualified retirement plan or IRA no longer than 60 calendar days (if the 60th day falls on a weekend, the funds must be deposited on the preceding business day)
• Applicable to Traditional, Roth
• Reported to IRS
• Member is only allowed to roll over funds once in a 12-month period
• Direct Transfer is a transfer of IRA funds from one institution to another institution (for benefit of the member)
• Applicable to Traditional, Roth
• Not reported to the IRS
• Transfer is handled between institutions; funds are not paid to the member
• No regulatory limitations on the frequency of direct transfers
• Funds are deposited into the same IRA type as withdrawn from
• Direct Rollover are funds distributed directly from a previous 401K or employer pension plan to an IRA or other qualified plan
• Applicable to Traditional and Roth
• Reported to the IRS
• Rollover is handled between institutions; funds are not paid to the member
• Conversion from Traditional IRA to Roth IRA:
  • To be eligible to convert some or all of the assets from a traditional IRA to a Roth IRA, the owner's adjusted gross income (AGI) for the year must be:
    • Single tax filers or married couples filing a joint return - $110,000 or less.
    • Married and filing separate returns: not eligible to convert money from a traditional IRA to a Roth IRA.
  • When converting a traditional IRA to a Roth IRA, any money in the account that hasn't already been taxed (such as deductible contributions, earnings and rollovers from employer-sponsored plans) will be taxed the year it is converted.