Secure Your Retirement With The Focus Federal Credit Union

No matter your life stage, it’s never too soon or too late to plan for retirement. While you may already be contributing to an employer-sponsored plan, an Individual Retirement Account (IRA) from The Focus Federal Credit Union is another type of retirement account available to help you save and invest. A traditional IRA account allows you to make periodic or lump-sum deposits. You can also take advantage of IRA tax benefits by deducting your contributions and reducing your taxable income.

Traditional IRA accounts offer you the significant advantage of tax-deferred growth. You can deduct all or part of your contributions from your federal taxes if you’re within the IRS income limits. This means you won’t pay taxes on your untaxed earnings or contributions until you’re required to start taking minimum distributions at age 73, potentially maximizing your savings. 

Accessing your money in a Traditional IRA is designed to be convenient. While the primary purpose of an IRA is for retirement, you can still access your funds at any time, providing you with a safety net. Before age 59 ½, distribution is subject to a 10% early withdrawal tax, ensuring the funds are primarily used for their intended retirement purpose. 

You can withdraw penalty-free for certain expenses, including: 

• Using up to $10,000 toward the purchase of your first home
• Paying for qualified college expenses
• Withdrawing up to $5,000 in the year you have a child
• Use toward health insurance premiums while you are unemployed

Anyone with earned taxable income can contribute to a Traditional IRA. The IRS sets annual contribution limits. For 2024, the yearly maximum is $7,000 for people under 50 or $8,000 for people 50 or above. 

Spouses can contribute if married and filing jointly. If you or your spouse has a retirement plan at work, you can still make contributions, but the deduction amount could be reduced or eliminated. If you and your spouse don’t have a retirement plan at work, you can deduct your IRA contribution regardless of income.

Opening an IRA is straightforward. Once you’ve set up your account, you can take your time funding it and making investment selections. 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’s the difference between Traditional and Roth IRAs?

The main difference is when taxes are applied. With a Traditional IRA, contributions are tax-deductible, while withdrawals made in retirement are taxed. No tax benefits are received when making contributions to a Roth IRA. Instead, when you make qualified withdrawals during retirement, those funds are taken out tax-free. 

Are IRAs and 401(k)s the same thing?

IRAs and 401(k)s are both retirement savings account options. You can set up an IRA through a financial institution if you earn income. A 401(k), on the other hand, is only available through an employer. 

Your employer’s plan administrator determines investment offerings in a 401(k), limiting your investment choices. But, with an IRA, you have more flexibility in your investment choices, allowing you to tailor your investments to your financial goals. 

Other differences include:

• 401(k)s have higher annual contribution limits.
• The IRS sets contribution rules. If you’re 50 or older, you can save an additional $7,500 in your 401(k). The maximum annual catch-up contribution for an IRA is $1,000.
• Contributions to a 401(k) must be made by December 31 to qualify for the current tax year. With an IRA, you have until April of the following year to make contributions, giving you more time to plan and manage your contributions effectively. 
• Certain employers have a vesting period before you can participate in their 401(k) plan. An IRA has no vesting period.

Can I also open an IRA if I have a 401(k) at work?

You can contribute to a 401(k) and IRA simultaneously. And if you leave your company, you can take the money with you and roll it into an IRA. 

Are there age limits to contribute to an IRA?

Before 2020, you could not contribute to an IRA after age 70½. The rules now permit you to contribute to a traditional IRA, regardless of age, if you work and earn income.

How much can I contribute to my IRA?

The IRS sets annual contribution limits. For 2024, the yearly maximum is $7,000 for people under 50 or $8,000 for people 50 or above.