Individual Retirement Account

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Less taxes now, more retirement later.

Many financial experts estimate that you may need up to 85% of your pre-retirement income in retirement. An employer-sponsored savings plan, such as a 401(k), might not be enough to accumulate the savings you need. Fortunately, you can contribute to both a 401(k) and an IRA.

An Individual Retirement Account (IRA) allows an individual to save for retirement with tax-free growth or growth on a tax-deferred basis.

IRAs are easy to establish and have only a few restrictions. Your Hatboro Federal IRA is maintained in a Certificate of Deposit (CD).

TRADITIONAL IRA

With a Traditional IRA, you can contribute up to $5,500 per tax year, or up to $6,500 per year if you are 50 years or older (1).

  • Your contributions may be tax-deductible and earnings grow tax-deferred until you withdraw the funds.
  • If you are covered by a retirement plan where you work, your IRA contributions may be totally or partially deductible depending on your adjusted gross income. Check with your tax advisor.
  • A married person can make a deductible contribution even though his or her spouse is covered by an employer sponsored retirement plan, depending on their combined adjusted gross income.
  • Withdrawals must begin when you reach age 70 1/2.
  • Early distributions for qualified higher education expenses and/or expenses of qualified first time homebuyers (2) are exempt from additional IRS tax penalties.

ROTH IRA

With a Roth IRA, you can contribute up to $5,500 per tax year, or up to $6,500 per year if you are 50 years or older (1).

Contributions are not tax-deductible. However, earnings grow tax-free and distributions are generally tax-free in the year received provided certain requirements are met.

The account offers a number of benefits:

  • Early distributions for qualified higher education expenses and/or expenses of qualified first time homebuyers (2) are exempt from additional IRS tax penalties.
  • Withdrawals are tax-free after age 59 1/2, or in the event of death or disability.
  • There is no age requirement as to when you can take distributions.
  • Your eligibility to make a Roth IRA contribution may be phased out based on certain modified adjusted gross income (MAGI) ranges. If you are single, your ability to make Roth IRA contributions phases out when your MAGI is between $118,000 and $133,000. If you are married filing jointly, your ability to make a Roth IRA contribution phases out when your MAGI is between $186,000 and $196,000.
  • You can contribute to a Roth IRA even if you are participating in an employer-sponsored plan.

COVERDELL EDUCATION SAVINGS ACCOUNT

Coverdell Education Savings Accounts, formerly called the Education IRA, is a way to help you save for a child’s education expenses. The earnings in the account are completely tax-free when withdrawn if used to pay for qualified educational expenses anytime before the child reaches the age of 30.

  • You can contribute up to $2,000 a year for each child under the age of 18 (1)
  • Friends and family members can contribute to the account as long as the maximum contribution per child is not exceeded in a given year.
  • The Education IRA can be rolled over to another child in the same family.
  • Age restrictions do not apply for children with special needs.
  • Contributions to an Education IRA do not count toward your own IRA contribution limit.

For more information about any Hatboro Federal IRA, contact Cheryl Allen at our Jamison office at 215.918.2722.

(1) For the 2017 tax year.

(2) As defined by IRS regulations.

NOTE: All IRAs are subject to the terms and conditions established by the Internal Revenue Service.  Please consult your tax advisor with any questions on how the IRA rules apply to your personal situation.

Current Rates

Each depositor is insured to at least $250,000 by the FDIC.  For more information, go to http://www.fdic.gov.