IRAs

IRAs help you gain an edge on retirement or education expenses.

Individual Retirement Accounts (IRAs) let you augment your pension and Social Security income while potentially enjoying a break on your taxes. You can reduce your current tax bill by deferring income tax on the dividends the account earns until you begin withdrawals, usually after retirement when your tax rate may be lower. Part or all of the money you deposit may be tax-deductible, depending on the IRA type, your overall income and pension plan participation status.

Austin Telco Federal Credit Union offers a wide variety of accounts for IRA savings available as either Traditional or Roth IRAs. Choose from an IRA Share Account or get any of several types of IRA Certificates or invest in a combination of accounts. Certificates range in terms as short as 3 months or as long as 5 years.

Traditional & Roth IRA Regular/Spousal Contribution (for Tax Year 2008-2009)

Traditional & Roth IRA Regular/Spousal Contribution

Standard Combined IRA Contribution Limit

Catch-up Amount (Age 50+)

Total Combined IRA Contribution Limit for Ages 50+

$5,000 (or 100% of compensation if smaller)

$1,000

$6,000 (or 100% of compensation if smaller)

IRA Share Accounts

Similar to a share savings account in that there is no minimum deposit requirement, any additions to the principal can be made at any time, up to the maximum contribution allowed per year, by law.
No penalties from the Credit Union for early withdrawal. However, the Internal Revenue Service imposes penalties for withdrawals prior to age 59½.

IRA Share Certificates

3 mo., 6 mo., 1-, 2-, 3-, 4-, and 5-year certificates are available
Minimum deposit of $1,000 is required, or any amount above these minimums
Dividend rates based on term of certificate

Jumbo IRA Certificates

3 mo., 6 mo., 1-, 2-, 3-, 4-, and 5-year certificates are available
A minimum deposit of $95,000 is required for Jumbo Certificates
Dividend rates based on term of certificate

*You should seek the advice of your own tax advisor with respect to your particular circumstances.

Types of IRAs

Traditional IRAs

IRS penalty-free withdrawals are allowed prior to age 59½ when the funds are used for first-time home purchases (up to a lifetime limit of $10,000) and/or higher education expenses.
Maximum annual contribution is $5,000 ($6,000 if over age 50) or 100% of your earned income, whichever is less.
Income caps for full tax deductibility on contributions will increase each year until the year 2010.

Traditional IRA Deductibility MAGI Thresholds
Filing Status	Tax Year	Full Contribution	Partial Contribution	No Contribution
Single	2008	<$53K	Between $53K & $63K	>$63K
	2009	<$55K	Between $55K & $65K	>$65K
Married, Joint	2008	<$85K	Between $85K & $105K	>$105K
	2009	<$89K	Between $89K & $109K	>$109K
Married, Joint (not active participant but spouse is)	2008	<$159K	Between $159K & $169K	>$169K
	2009	<$166K	Between $166K & $176K	>$176K

Roth IRAs

The Roth IRA, like the Traditional IRA, has a maximum annual contribution limit of $5,000 ($6,000 if over age 50) or 100% of your earned income, whichever is less.
Contributions to a Roth IRA are not tax-deductible. Your eligibility to contribute to a Roth IRA is not dependent on whether you are covered by a retirement plan at work.
Dividends grow tax-free.
Withdrawals of contributions are tax-free. Withdrawals of earned dividends are tax-free after age 59½, as long as the money has been in the account for five years.
Tax-free distributions from the Roth IRA are permitted prior to age 59½ for disability and/or first-time home purchases (up to a lifetime limit of $10,000), as long as the money has been in the account for five years.
Unlike Traditional IRAs, the Roth IRA allows you to make contributions after the age of 70½.
The Roth IRA does not require mandatory minimum distributions once you reach age 70½.
Converting Traditional IRA to a Roth IRA:

- You can convert your Traditional IRAs to a Roth IRA, using special rules developed by the IRS.
- Amounts in Traditional IRAs can be transferred to Roth IRAs provided the tax payer's Adjusted Gross Income is $100,000 or less for the year in which the transfer is made.
- The transferred amount is subject to income tax, but is exempt from IRS early withdrawal penalties.

Roth IRA Eligibility MAGI Thresholds
Filing Status	Tax Year	Full Contribution	Partial Contribution	No Contribution
Single	2008	<$101K	Between $101K & $116K	>$116K
	2009	<$105K	Between $105K & $120K	>$120K
Married, Joint	2008	<$159K	Between $159K & $169K	>$169K
	2009	<$166K	Between $166K & $176K	>$176K
Married, Separate	2008	N/A	<$10K	>$10K
	2009	N/A	<$10K	>$10K

Traditional and Roth IRA Comparison Chart (For Tax Year 2008-2009)

Feature Traditional IRA Roth IRA
Adjusted Gross Income Eligibility Restrictions Any Individual under the age of 70½ with compensation or earned income. Individuals earning $ 99,000 or less. Joint Filers earning $156,000 or less.
Maximum Annual Contribution
A maximum of $5,000 or $6,000 can be contributed to one or the other -or- split between both.) $5,000 (under age 50)
$6,000 (over age 50) $5,000 (under age 50)
$6,000 (over age 50)
Non-wage Earning Spousal Contribution $5,000 (under age 50)
$6,000 (over age 50) $5,000 (under age 50)
$6,000(over age 50)
Tax Deductibility of Contributions Up to 100% depending on Annual Gross Income and participation in an employer-sponsored retirement plan, such as a 401(k) Deductions Not Allowed
Tax treatment of dividend earnings Grow tax-deferred until withdrawn Grow tax-free
Taxes Upon Withdrawal Withdrawals of contributions and dividend earnings are taxed as ordinary income at the then current tax rate
No tax on withdrawals of contributions.
No tax on withdrawals of earnings at the end of the 5 year holding period if the owner:
has attained age 59½
is disabled
is taking a qualified 1st time home-buyer distribution; or
is deceased
Withdrawal Restrictions
Withdrawals before age 59½ will result in a 10% penalty tax.
Exceptions to the penalty tax:
1st time home-buyer
Higher education expenses
Certain medical expenses
Health insurance for unemployed individuals
IRS Tax levy
Contributions to a Roth IRA
Disability
Death
Penalty-Free withdrawals of earnings allowed after 5-year holding period AND one of the following qualified reasons.

Age 59½ or older
Disabled
1st time home-buyer
Death

Age at which withdrawals must begin 70½ Not Applicable

Feature	Traditional IRA	Roth IRA
Adjusted Gross Income Eligibility Restrictions	Any Individual under the age of 70½ with compensation or earned income.	Individuals earning $ 99,000 or less. Joint Filers earning $156,000 or less.
Maximum Annual Contribution A maximum of $5,000 or $6,000 can be contributed to one or the other -or- split between both.)	$5,000 (under age 50) $6,000 (over age 50)	$5,000 (under age 50) $6,000 (over age 50)
Non-wage Earning Spousal Contribution	$5,000 (under age 50) $6,000 (over age 50)	$5,000 (under age 50) $6,000(over age 50)
Tax Deductibility of Contributions	Up to 100% depending on Annual Gross Income and participation in an employer-sponsored retirement plan, such as a 401(k)	Deductions Not Allowed
Tax treatment of dividend earnings	Grow tax-deferred until withdrawn	Grow tax-free
Taxes Upon Withdrawal	Withdrawals of contributions and dividend earnings are taxed as ordinary income at the then current tax rate	No tax on withdrawals of contributions. No tax on withdrawals of earnings at the end of the 5 year holding period if the owner: has attained age 59½ is disabled is taking a qualified 1st time home-buyer distribution; or is deceased
Withdrawal Restrictions	Withdrawals before age 59½ will result in a 10% penalty tax. Exceptions to the penalty tax: 1st time home-buyer Higher education expenses Certain medical expenses Health insurance for unemployed individuals IRS Tax levy Contributions to a Roth IRA Disability Death	Penalty-Free withdrawals of earnings allowed after 5-year holding period AND one of the following qualified reasons. Age 59½ or older Disabled 1st time home-buyer Death
Age at which withdrawals must begin	70½	Not Applicable

*Partial Contributions are allowed for individuals with MAGI earnings between $105,000 & $120,000, and joint filers with MAGI earnings between $166,000 & $176,000.

Coverdell Education Savings Account

Filing Status	Full Contribution	Partial Contribution	No Contribution
Married, Joint	MAGI $190K or less	MAGI between $190K and $120K	MAGI $220K or more
All Others	MAGI $95K or less	MAGI between $95K and $110K	MAGI $110K or more

An individual with certain MAGI ranges can contribute up to $2,000 a year to a Coverdell Account to fund qualified educational expenses of a named beneficiary under age 18 unless the beneficiary is a special needs beneficiary, in which case there is no age limitation. More than one individual can contribute for the same beneficiary as long as total contributions do not exceed $2,000 per year. Contributions to Coverdell Accounts are not deductible, but earnings are not taxed while they remain in these accounts and withdrawals are tax-free if the distribution is used to pay for the beneficiary’s qualified undergraduate or graduate education expenses -- including tuition, books, room and board -- during the year the distribution is made. Certain elementary and secondary education expenses also qualify.

An individual can make a full $2,000 contribution to a Coverdell Account if his or her year 2009 adjusted gross income is $95,000 or less ($190,000 or less for joint filers). Partial contributions are available to individuals with income between $95,000 and $110,000 ($190,000 and $220,000 for joint filers).

*You should seek the advice of your own tax advisor with respect to your particular circumstances.

For more information on your IRA account options at ATFCU, please call 512.302.5555.