IRAs are a great tool to save for major events in your life, such as retirement, college expenses, or a new home. East County Schools has both share and certificates, Roth and Traditional. Stop by a branch to open an account.
IRA Share Accounts
- Similar to a share savings account in that there is a $5.00 deposit requirement to start.
- Additions to the principal can be made at any time, up to the maximum contribution allowed per year by law:
- Contribute up to $6,500 per year or $7,500 per year if you are 50 or older for 2023
- Contribute up to $7,000 per year or $8,000 per year 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.
Beginning in 2023, the SECURE 2.0 Act raised the age that you must begin
taking RMDs to age 73. If you reach age 72 in 2023, the required
beginning date for your first RMD is April 1, 2025, for 2024.
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 | In 2023 Individuals earning $153,000 or less. Married couples earning $228,000 or less. In 2024 these rise to $161,000 or less for individuals and $240,00 or less for married couples. |
| Maximum Annual Contribution 2023 | $6,500 (if under age 50) $7,500 (if over age 50) | $6,500 (if under age 50) $7,500 (if over age 50) |
| Non-wage Earning Spousal Contribution 2023 | $6,500 (if under age 50) $7,500 (if over age 50) | $6,500 (if under age 50) $7,500 (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 | When you reach age 72 (73 if you reach age 72 after Dec. 31, 2022) | None |
(Does not imply that $6,500 or $7,500 can be contributed to both IRA types. A maximum of $6,500 or $7,500 can be contributed to one or the other -or- split between both.)
Traditional IRAs
Annual Traditional IRA contribution limits in 2023 are the same as Roth IRAs: You can contribute $6,500 a year if you're under 50, or $7,500 if you're 50 or older.
In 2024, the annual contribution limit for both Roth and traditional IRAs rises to $7,000 for those under 50, and $8,000 for those 50 and above.
To contribute to a Roth IRA, single tax filers must have a modified adjusted gross income (MAGI) of less than $153,000 in 2023. In 2024, the threshold rises to $161,000.
If married and filing jointly, your joint MAGI must be under $228,000 in 2023. In 2024, the threshold rises to $240,000.
- 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, allows you to contribute $6,500 a year if you're under 50, or $7,500 if you're 50 or older for 2023. In
2024, the annual contribution limit for both Roth and traditional IRAs
rises to $7,000 for those under 50, and $8,000 for those 50 and above. 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. After the death of the owner; however, beneficiaries of a Roth IRA are subject to the RMD rules.
- 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.
ECSFCU!
