IRA Share Accounts
- Similar to a share savings account in that there is a $5.00 deposit requirement and additions to the principal can be made at any time, up to the maximum contribution allowed per year by law.
- You can contribute up to $6,500 per year plus an additional $1,000 catch up if you are 50 or older for 2023 and $7,000 per year plus an additional $1,000 catch up if you are 50 or older for 2024. Contributions made January 1 - April 15 can be for the current or previous year.
- Dividends are calculated daily and paid monthly.
- No East County Schools FCU penalties for early withdrawal. The Internal Revenue Service does impose penalties for withdrawals prior to age 59½.
IRA Share Certificates of Deposits (CDs)
- 3-month to 60-month certificates are available.
- Minimum purchase amounts of $1,000 or any amount above this minimum.
- "Maturity sensitive," generally paying higher Dividend Rates for those with longer maturities.
- Certificates automatically renew at maturity unless you indicate otherwise.
- East County Schools FCU imposes penalties for early withdrawals.
- Terms of up to one year – 30 days of dividends or $25.00, whichever is less
- Terms of greater than one year – 90 days of dividends
All Individual Retirement Accounts are insured to $250,000 by the NCUA (National Credit Union Administration) separately from any other share accounts you may have with East County Schools Federal Credit Union.
Compare Individual Retirement Accounts
Description | Traditional IRA | Roth IRA |
---|---|---|
Adjusted Gross Income Eligibility Restrictions | Almost everyone with earned income may participate | Individuals earning $125,000 or less Married couples earning $208,000 or less in 2022 |
Maximum Annual Contribution | $6,000 (if under age 50) $7,000 (if over age 50) | $6,000 (if under age 50) $7,000 (if over age 50) |
Non-wage Earning Spousal Contribution | $6,000 (if under age 50) $7,000 (if over age 50) | $6,000 (if under age 50) $7,000 (if over age 50) |
Tax Deductibility of Contributions | Up to 100% depending on Annual Gross Income and participation in an employer-sponsored retirement plan. | Cannot deduct |
Tax treatment of dividend earnings | Grow tax-deferred until withdrawn | Grow tax-free |
Taxes Upon Withdrawal | Withdrawals of contributions and dividend earnings are taxed as ordinary income at the then current tax bracket | None |
Withdrawal Restrictions | Currently, most withdrawals before age 59½ result in IRS penalties. Some exceptions are made for catastrophic medical expenses or disability. The new law allows for early penalty-free withdrawal for first-time home purchases and/or college expenses. | IRS penalty-free withdrawal after age 59½, so long as the money has been in the account for five years. Penalty-free and tax-free withdrawals prior to age 59½ if the funds are used for disability or first-time home purchase. The five-year-in-the-account rule applies. |
Age at which withdrawals must begin | 72 (70 ½ if you reached 70 ½ before January 1, 2022) | None |
(Does not imply that $6,000 or $7,000 can be contributed to both IRA types. A maximum of $6,000 or $7,000 can be contributed to one or the other -or- split between both.)
Traditional IRAs
- Maximum annual contribution is $6,000 if under age 50 or $7,000 if over age 50, or 100% of your earned income, whichever is less, for 2020 & 2021. Income limits also apply.
- IRS penalty-free withdrawals are allowed prior to age 59½ when the funds are used for first-time home purchases (up to a lifetime limit of $10,000) and/or higher education expenses.
Roth IRAs
- The Roth IRA, like the Traditional IRA, has a maximum annual contribution limit of $6,000 if under age 50 or $7,000 if over age 50 from earned income, for 2019 & 2020. Income limits also apply.
- Contributions to a Roth IRA are not tax-deductible.
- Your eligibility to contribute to a Roth IRA is not dependent on whether you are covered by a retirement plan at work.
- Dividends grow tax-free.
- Withdrawals of both contributions and earned dividends are tax-free after age 59½, as long as the money has been in the account for five years.
- Tax-free distributions from the Roth IRA are permitted prior to age 59½ for disability and/or first-time home purchases (up to a lifetime limit of $10,000), as long as the money has been in the account for five years.
- Unlike Traditional IRAs, the Roth IRA allows you to make contributions after the age of 70½.
- The Roth IRA does not require mandatory minimum distributions once you reach age 70½.
- Converting Traditional IRAs to a Roth IRA:
- You can convert your Traditional IRAs to a Roth IRA, using special rules developed by the IRS.
- The transferred amount is subject to income tax, but is exempt from IRS early withdrawal penalties.