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 IRA investments are subject to substantial interest penalties for amounts withdrawn prior to maturity.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 contribution to an IRA.  The contribution limit is the lesser of the maximum allowable limit for the year or 100% of compensation.

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.  Catch up 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.  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. 
 

Prior Year Contribution – An individual can make regular contributions to his/her IRA at any time during the year.  The contribution deadline effectively provides an individual an additional three and one-half months to contribute for any tax year.  During the period from January through April 15 (the tax filing season for the majority of taxpayers), an individual can contribute for his/her current tax year or the previous tax year. 

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 18^th birthday. 
 

All of these accounts may 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 or tax preparer.

Savings Account Disclosures