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Millions of Americans take advantage of the significant tax benefits Individual Retirement Accounts (IRAs) offer. But surprisingly, many millions more do not. We suspect it’s because saving in an IRA can be confusing, and many financial institutions only allow for annual IRA distributions, so the money may not be available when people they need it. What’s more, many financial institutions set high minimum deposit requirements to open an account. On April 1, 2006, the Federal Deposit Insurance Corporation (FDIC) board of directors raised the insurance coverage on certain retirement accounts at a bank or savings institution to $250,000 from $100,000. These rules apply to traditional and Roth IRAs. The IRAs and other retirement accounts that are protected under the new rules to $250,000 are insured separately from other accounts at the same institution that will continue to be insured up to at least $100,000. Through our conventional account options, which are ideal as you begin to build your IRA, you can make contributions of as little as $10 a month. With your tax-sheltered IRA at Bank of Colorado, you can decide how much to deposit each month. The only requirement is that you contribute at least $10 a month. If you are interested in learning more about all of the innovative IRA options available to you at Bank of Colorado, we’ll work with you to establish the plan that is best for you. We look forward to hearing from you! Traditional IRA If you’re under age 701/2 with earned income, you’re eligible to make a contribution to a traditional IRA, regardless of your income level. This account allows you to make pre-tax contributions and defer taxes on their earnings until they are withdrawn when you are near retirement. This reduces your overall tax payments—provided your tax rate is lower at the time of withdrawal than when you invest, which is true for many people. Only invest in an IRA if you are sure you will not need to withdraw the money early, as an expensive penalty will apply. · Certain contributions are tax deductible in the tax year for which they are made. Roth IRA Roth IRAs differ from traditional IRAs because the contributions are made in after-tax dollars. The money grows tax-deferred, and if you meet certain requirements, you get to take the money out of retirement income-tax free. • Because you pay tax on your Roth IRA contributions in the year you earn them (instead of when you withdraw them), Roth IRAs are often considered a good tool if you expect to be in a higher tax bracket when you retire than you are now. • A Roth IRA can be a powerful tool to build wealth for your estate and give the benefit of tax-free income to your heirs, too. Education IRA Like traditional and Roth IRAs, Education IRAs are also tax-deferred investment instruments. They allow you to save money for the future education expenses of a designated beneficiary, usually a child or grandchild. This investment is a good choice if you want to help pay for a child’s education and you want your earnings to grow tax-exempt. SEP A SEP (Simplified Employee Pension) plan is a retirement plan ideally suited to small businesses. These plans are funded by the employer to an employee’s IRA. SEPs may be established by owners of businesses (incorporated or unincorporated), sole proprietors, and partnerships. SEP plans are especially popular with independent contractors and sole proprietors. For more information or to sign up, contact your local Bank of Colorado today. |
