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Individual Retirement Accounts

What is a Traditional IRA?

A traditional IRA is a type of retirement plan that, in many cases, offers tax-deferred earnings and the possibility for tax-deductible contributions. These tax advantages make the traditional IRA a powerful tool in creating a balanced, long-term
savings plan.

With a traditional IRA:

  • Accumulated earnings are tax deferred
  • Contributions are tax-deductible if you qualify
  • The amount you can contribute is increasing
  • Normal withdrawals (without penalty) can begin at age 59½

Am I eligible to have a traditional IRA?

If you are younger than age 70½ for the entire tax year, and are employed, you are eligible to establish a traditional IRA.

Do I get a tax deduction for my contribution?

If you or your spouse are active participants in an employer-sponsored retirement plan, the deductible amount is dependent on your modified adjusted gross income and income tax-filing status. You may be eligible for the maximum deduction, a partial deduction, or no deduction. Your tax professional can help you determine your actual deduction.

You can still make nondeductible contributions to your IRA. You may also be eligible for a Roth IRA.

What is a Roth IRA?

Although Roth IRA contributions are not tax deductible, earnings are tax exempt if withdrawn after age 59½ and are distributed after the five year holding period. Distributions of the Roth IRA owner’s annual contributions before the five-year holding period are not subject to tax or penalty. If a distribution consists of earnings and the five-year holding period has not elapsed or the owner is younger than age 59½, the earnings may be subject to tax and a 10% penalty unless an exception applies. Roth IRA owners who are younger than age 59½ may take a Roth IRA distribution without penalty for the following qualified reasons:

  • Death
  • Disability
  • First-time homebuyer ($10,000 lifetime limit)
  • Certain medical and insurance expenses

Increased IRA contribution limits

Now you can contribute more money than ever to your traditional and Roth IRAs. And, if you’re age 50 or older, you can make “catch-up” contributions that exceed standard contribution limits. Plus, beginning in 2009, contribution limits will be eligible for annual cost-of-living adjustments. As of 2006 your IRA is insured up to $250,000 by the NCUA.


How do I open an IRA?

Visit with a Cyprus Member Service Representative at any branch or call 801/260.7600 (option 3). We will explain these accounts in more detail and help you establish your own money saving IRA.