IRAs / Coverdell Ed. Savings / Health Savings
Retirement Planning 101
Individual Retirement Accounts (IRAs)
The special tax benefits offered by different IRAs make them an attractive investment for retirement and educational funds.
- Automatic payroll deductions into your IRA available for your convenience
- Rollover into IRA CDs when account balance is $1,000 or higher
(IRA CDs earn at the current CD rate)
- Check our IRA rate and CD rates online
Traditional and Roth IRS Aggregate Annual Contribution Limits
|Tax Year||Annual Contribution Limit||Additional “Catch-Up” Contribution for Owners Age 50 & Older|
|2019||$6,000||$1,000 ($7,000 total)|
IRA Comparison Chart
|Highlights||A retirement savings plan for those who have taxable compensation and are under the age of 70½ in the contribution year.
Participation in an employer sponsored retirement program may reduce the tax deductibility of your Traditional IRA contributions.
There is no income limit on contribution eligibility.
|A retirement savings plan for individuals with taxable compensation and who meet income limit eligibility guidelines.
There is no age limit on contributions.
The Roth IRA potentially has greater tax benefit, such as possible tax-free earnings and no mandatory distribution requirements.
|2018 Contribution Limits||$5,500 or 100% of earned income, whichever is less||$5,500 or 100% of earned income, whichever is less|
|2018 Catch-Up Provisions||An additional $1,000 for individuals age 50 and over||An additional $1,000 for individuals age 50 and over|
|Tax Deductibility1||Possible deductions1
(see IRS Publication 590)
|Tax Advantages1||Taxes on deductible contributions and earnings are deferred until a distribution is taken||Qualified distributions are tax-free (See Distributions below)|
|Income Eligibility||Effect of Modified AGI on deduction if covered by a Retirement Plan at work
||Effect of Modified AGI on Roth IRA Contribution:
|Distributions||Distributions prior to age 59½ are generally subject to a 10% IRS penalty (See Penalty-Free Distribution Exceptions for exceptions)
Distributions must begin no later than April 1, following the Member’s 70 ½ birthday.
|In order to be considered a “Qualified Distribution”, the Roth IRA plan must have been open for at least 5 years and one of the following:
Distributions of contributions are tax-free and IRS penalty-free at any time.
|Penalty-Free Distribution Exceptions||Death, disability, substantially equal periodic payments, first-time home purchase, post-secondary education expenses||Death, disability, first-time home purchase|
|Rollovers and Transfers||Rollovers and transfers to and from other Traditional IRAs or qualified employer sponsored retirement plans are permitted||Rollovers and transfers to and from other Roth IRAs are permitted|
|Annual Contribution Deadline||IRS stated annual tax filing deadline||IRS stated annual tax filing deadline|
1For specific tax advice, consult a qualified tax professional
How much can I contribute to a Roth or Traditional IRA for 2016?
Assuming eligibility, you can contribute up to $5,500 per year or 100% of your earned income, whichever is less. Married couples can contribute up to a total of $11,000 per year, but no more than $5,500 per spouse. You can contribute the maximum to a traditional IRA, Roth IRA or split between the two types.
How does the “catch-up” contribution plan work if I am age 50 or older?
A special exception applies if you are age 50 or older that allows you to contribute an additional $1,000 to an IRA.
More information about Traditional and Roth IRAs is available at the IRS website below:
This information is not intended as tax advice. Please consult a tax professional regarding your specific circumstances. For more information about TelComm IRA products, call 417.886.5355.
Coverdell Education Savings Account
Give your child the gift of education.
Seeing a child work toward a college degree is a parent’s dream. A Coverdell Educational Savings Account (ESA) can help parents sleep at night. These ESAs were created to help you pay for your child’s education expenses, such as tuition, fees, books, supplies, equipment and, in some cases, room and board and computers. These options were improved by the Economic Growth and Tax Relief Reconciliation Act of 2001.
Contributions to a Coverdell ESA are never tax-deductible. However, a Coverdell ESA offers you the potential for tax-free withdrawals—including earnings.
The total contributions each year to a child’s Coverdell ESA cannot exceed $2,000. If you’re eligible, you can contribute the full amount for each child. For example, if you have three children and each has his or her own Coverdell ESA, you can contribute $6,000 ($2,000 to each ESA).
The main benefits of a Coverdell ESA include:
* Unlike state 529 plans, Coverdell ESAs can be used to pay for qualified elementary and secondary education expenses.
* Earnings grow on a tax-deferred basis, and distributions are tax-free if the money is used to pay qualified education expenses.
Coverdell ESA Annual Contribution Limits Per Child
|Tax Year||Annual Contribution Limit|
Health Savings Account (HSA)
A Health Savings Account (HSA) is designed to help you save money for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment.
Any adult can contribute to an HSA if they:
- Have coverage under an HSA-qualified “high deductible health plan” (HDHP)
- Have no other first-dollar medical coverage (other types of insurance, like specific injury insurance or accident, disability, dental care, vision care, or long-term care insurance are permitted).
- Are not enrolled in Medicare.
- Cannot be claimed as a dependent on someone else’s tax return.
Contributions to your HSA can be made by you, your employer, or both. However, the total contributions are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return.
Brochures with more detailed information about Health Savings Accounts are available at all TelComm locations. Drop by and pick one up anytime!
2019 Tax Year: Single Coverage Annual Limit= $3,500
2019 Tax Year: Family Coverage Annual Limit= $7,000
2019 HSA Catch-Up Contribution Limits for Owners Age 55 + is $1,000 per year.
To learn more about Health Savings Accounts, click here.