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Bank of Sun Prairie offers separate
IRA savings plans with varying maturities, interest rates and other
features. You select the account or combination of accounts that best meet
your needs. IRA investments are subject to substantial interest penalties
for amounts withdrawn prior to maturity. More information is available
upon request.
Traditional IRA - There
is no minimum age for funding an IRA, but there is a maximum age.
The rules do not allow regular IRA contributions for the tax year
in which an individual attains age 70 ½ or any year thereafter.
An individual must have compensation to make a regular contribution
to an IRA. The contribution
limit is the lesser of the maximum allowable limit for the year or 100% of
compensation.
For tax year 2003 contribution limit
for taxpayers younger than age 50 during the year is $3,000.
The contribution limit for subsequent years, tax years 2003-2004
$3,000. In years 2005-2007 the
limit is $4,000 and in tax year 2008 the limit is $5,000.
Catch Up
Provisions - An individual who attains age 50 before the close
of a taxable year may make a “catch up” contribution for that taxable
year. The contributions allow
older workers an opportunity to boost their account balances.
The allowable catch-up contribution amount increases the maximum
allowable contribution limit for IRA owners age 50 or older.
For tax years 2003-2004 the total contribution for age 50 and over
is ths standard contribution limit of is $3,000 plus the $500 catch-up
contribution for a total of $3,500. For
tax year 2005 the standard contribution limit is $4,000,plus the $500 catch-up
contribution for a total of $4,500. For
tax years 2006-2007 the $4,000 standard contribution limit plus the $1,000 catch-up
contribution brings the total contribution to $5,000.
For tax year 2008, the standard limit is $5,000 and the total with
$1,000 catch-up contribution is $6,000.
Spousal
Contributions - Spousal contribution rules allow a married
individual with little or no compensation to contribute to an IRA based on
the married couple’s combined compensation.
They must file a joint federal income tax return and the amount of
compensation earned by the individual making the spousal contribution must
be less than that of his/her spouse. An
individual whose spouse is age 70 ½ or older and has compensation may
make a spousal contribution to a traditional IRA as long as he/she is
younger than age 70 ½.
One of the most attractive features of
the traditional IRA is the ability to deduct a contribution on one’s
federal income tax return. Please
check with your tax preparer as to whether you may be eligible to deduct
your IRA contributions.
Roth IRA
- This
account does not have an age restriction, however, you must still have
earned income. Roth IRAs are
nondeductible accounts that feature “tax free”
withdrawals for certain distribution reasons after a five year holding
period.
There are many similarities between
the Roth IRA and the traditional IRA.
For example, the Roth IRA has the same maximum annual contribution
limits as the traditional IRA. Other
similarities include the deadline for contributing, the definition of
compensation for purposes of determining eligibility and the distribution
types that are exceptions to the 10% premature distribution penalty tax on
early distributions.
Roth IRA contributions are never tax
deductible, while traditional IRA contributions may be tax deductible.
There are no required minimum distributions for a Roth IRA owner at
age 70 1/2 , there is no age limit for contributors, regular contributions
are available prior to age 59 ½ without a 10% penalty tax, and
distributions of earnings are tax free when qualified.
Coverdell Education Savings Account
- This is a non tax-deductible account that features tax free
withdrawals for a child’s qualified education expense.
“CESAs” are tax-favored savings accounts created to help save
for an individual’s education expenses.
Distributions for qualified education expenses are federally
tax-free and not subject to a 10% penalty tax.
A CESA is established and funded by
someone other than the person it is intended to benefit.
The rules do not require any specific familial relationship.
The child must be under age 18 and the contribution limit is $2,000
per child per year. Contributors
are not required to have compensation in order to contribute to a CESA,
however, if he/she has income,
this may affect the contribution amount.
No contributions are permitted after a designated beneficiary’s
18th birthday.
IRAs offer significant advantages over
other types of savings, but special rules do apply.
To be absolutely certain you get the maximum value it is best to
speak with a trusted financial advisor.
 
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