Secure Your Future with Individual Retirement Accounts from Focus FCU

Individual retirement accounts, or IRAs, are personal investment accounts allowing you to save for retirement. Your money will grow tax-free or on a tax-deferred basis. 

IRAs are a good option if you are self-employed, a freelancer, or your employer doesn’t offer a 401(k) or 403(b) plan. If you can access an employer-sponsored plan, you can still open an IRA and take advantage of tax advantages to boost your retirement savings.

The Focus Federal Credit Union offers Traditional IRAs, Roth IRAs, and Coverdell Education Savings Accounts. 

• Traditional IRA: With a Traditional IRA, you contribute pre-tax dollars to a retirement investment account. The funds grow tax-deferred until you make retirement withdrawals, which can start at age 59½ or later. You can make periodic or lump-sum tax-deductible contributions. Traditional IRAs do not have income restrictions. 

The Internal Revenue Service sets annual contribution limits for your convenience, which are based on your age. The contribution limit for the 2024 tax year is $7,000 if you’re under 50. But if you’re 50 or older, you can contribute more with higher annual limits via a catch-up contribution, allowing an additional $1,000.

• Roth IRA: A Roth IRA is a smart choice if you prefer to contribute after-tax dollars. The money you invest grows tax-free, and when you turn 59½ and the account has been open for at least five years, you can withdraw from your Roth IRA without paying federal taxes. Roth IRAs have income eligibility limitations and the contribution limits for the 2024 tax year are the same as for traditional IRAs.
• Coverdell Education Savings Account: Coverdell ESAs offer tax-free investment growth and withdrawals when you use the money on qualified education expenses. Funds for college and qualified elementary and secondary education expenses include books, supplies, equipment, academic tutoring, and special needs services.

An IRA can help supplement your savings in your employer-sponsored retirement plan. You can access a range of investment choices not available in employer-sponsored plans. You also can benefit from tax advantages, including:   

• Traditional IRAs offer tax-deferred growth. You won’t pay taxes on your untaxed earnings or contributions until you’re required to at age 73. 
• A Roth IRA includes a tax break in retirement. Since you contribute after-tax dollars, your earnings and withdrawals are not taxed in retirement.

Roth IRAs have no age limit for opening or contributing. Your ability to contribute may be reduced based on your tax filing status and the amount of your adjusted gross income. To open an account, visit a TFFCU branch or go online. 

You’ll need to provide:

• Full name, address, and telephone number
• Social security number
• Driver’s license number
• Date of birth
• Beneficiary information
• Employer information

What are the advantages of an IRA?

An IRA offers a tax-advantaged way to save for retirement. It can be an option if you don’t have an employer-sponsored plan or if you have additional funds you want to invest. Depending on the type of IRA, it can reduce your tax bill when you invest or withdraw in retirement. 

Is a Traditional or Roth IRA better? 

Choosing between a traditional and a Roth IRA comes down to clearly defining your goals. A traditional IRA may be better suited if, when you retire, you will be in the same or a lower tax bracket than you are now. A Roth IRA may be a better option if you may be in a higher income tax bracket in retirement than you are now. 

When can I withdraw from an IRA?

The longer you can wait before taking distributions, the better. Typically, the best time to withdraw is at age 60 or older. If you cancel before age 59½, you will incur a 10% early withdrawal penalty and taxes on the withdrawal. 

What Is the Difference Between an IRA and a 401(k)?

An IRA and 401(k) are both options for saving for retirement. A 401(k) is an employer-managed plan. Unless you are an employee of a company offering a plan, you can’t participate. The employer chooses the investments available and oversees the plan administration. An IRA is a self-managed retirement account you choose and manage.