The Economic Growth and Tax Relief Reconciliation Act of 2001 provided major changes to the IRA savings. Here are some of the highlights of these changes.

Higher Annual Contribution Limits 

The amount qualified IRA owners are permitted to contribute in tax year 2007 is $4,000. This amount will increase to $5,000 for 2008. Additional catch-up contributions can be made by qualified individuals over fifty. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments.

When you retire or change jobs, rolling your retirement plan assets into an IRA instead of taking a cash payout. This helps you delay federal income taxes, and avoid mandatory federal withholding and applicable penalties. Now, funds from governmental 457(b) plans are also eligible for rollover into an IRA, as well as the previously allowed 401(k) and 403(b) plans.

Education IRA is Worth a Second Look

Your IRA Options at Financial Plus Federal Credit Union

IRA Certificates — for a higher yield with a low minimum deposit requirement of $500.

At Financial Plus Federal Credit Union we offer advantages such as competitive rates, insured deposits, and payroll deduction. To put the new IRA improvements to work for you, contact our Member Services department at (810) 244-2200 or toll free at (800) 748-0451.

We offer Traditional (tax-deferred earnings and the opportunity to deduct your contributions from your tax return) and Roth (the potential for tax-free withdrawals, including your earnings) IRAs with a variety of options to help you build your IRA savings

 Time to Plan for Your Future IRA Contributions

• Traditional IRA owners may contribute up to $4,000 per year or 100% of compensation, whichever is less. Married couples can contribute up to $8,000 a year total, but no more than $4,000 per spouse.
• Combined contributions to Roth and traditional IRAs limited to $4,000 per person per year.
• Contributions can be made to a traditional IRA if the owner has compensation (earned income) and will not reach 70½ by the end of the year.
• Earnings are not taxed until they are withdrawn. This ability to defer taxes on the earnings, and to withdraw in a year when the IRA owner may be in a lower tax bracket, can mean more after-tax dollars for retirement.
• Participation in an employer-sponsored retirement plan will not affect your ability to contribute to a traditional IRA (assuming age and compensation requirements are met). However, higher-income earners will lose their ability to deduct their contributions if participating in an employer-sponsored plan.
• Early distributions or withdrawals before age 59½ will be subject to a 10% tax, except in the following situations:
  • Amounts rolled over or directly transferred to another traditional IRA
  • Amounts properly converted to a Roth IRA
  • Withdrawals that are treated as the return of non-deductible contributions
  • Payments to your beneficiaries after your death
  • Withdrawals of up to $10,000 for first-time home purchases
  • Amounts used to pay for post-secondary education expenses
  • Amounts used to pay for catastrophic medical expenses
  • Pre-59½ periodic payments
  • Distributions to an owner who is disabled
  • Distributions for medical insurance during unemployment
• At age 70½ traditional IRA owners must begin taking required minimum distributions. Each year thereafter they must take out a minimum amount that is determined based on single life expectancy, or joint life expectancy with their designated beneficiary.

• No age limit, contributions are allowed at any age as long as the IRA owner has compensation (earned income).
• Combined contributions to Roth or Traditional IRA limited to $4,000 per person per year.
• Contributions are made from "after-tax" income … nondeductible.
• Distributions …
  • Contributions can be withdrawn tax and penalty free at any time, for any reason.
  • Earnings may also be withdrawn tax-free provided certain conditions are met; 1) If the Roth IRA has been open for 5 years, and 2) The IRA owner is age 59½, disabled, deceased, or buying a first home.
  • Earnings may be withdrawn penalty-free (the 10% early withdrawal penalty) for the following reasons; IRA owner deceased, over 59½, disabled, first-time home purchase, education expenses, large medical bills, or for health insurance premiums while unemployed.
• Roth IRA owners are not required to take periodic payments at age 70½ as do traditional IRA owners.
  

• The sole purpose of the Coverdell Education Savings Account is to help pay for education expenses, such as tuition, fees, books, supplies and equipment. In some cases, room and board is also a qualified expense.
• Anyone who meets the income requirements can open and contribute to a child's Coverdell Education Savings Account. This includes grandparents, aunts and uncles, family friends, or anyone else who wants to pitch in to your child's college fund. However, the total contributions to all Coverdell Education Savings Account for each child cannot exceed $2,000 per year.
• The account will be in the child's name using the child's social security number. The child must qualify for Financial Plus membership.
• Contributions can be made until the child reaches the age of 18.
• Withdrawals for qualified education expenses will be tax free as long as all funds are used before the child reaches age 30.
• Elementary and Secondary school expenses have been added to the list of qualified expenses that may be paid tax free.
• If the child does not attend college or leaves school before all the funds are withdrawn, the remaining funds can be transferred to another child in the family.
• Individuals contributing to an Coverdell Education Savings Account can still fund their own Roth or  Traditional IRA up to $4,000 per year, as long as the eligibility requirements are met.

• IRA savings account with no minimum deposit.
• Share certificates - terms from 6 to 60 months; $500 minimum deposit.