IRAs

IRAs

It is never too early to plan for a better financial future! An IRA is a savings vehicle designed to maintain your standard of living throughout retirement. If you work and are under age 70 ½ this year, you can set up a Traditional IRA.

Visit the Lebanon Federal Retirement Central for more information.  Access IRA information from the Planning Tools section on Retirement Central.

*IRA SPECIAL

*If you open a NEW IRA at Lebanon FCU by August 1, 2018, and mention this promotion, LFCU will help you get started by making a $25.00 deposit into your new IRA Share Account. To qualify for this offer, member must also have established general membership by having a  LFCU Savings Share Account.   To establish membership, it requires $25 in a LFCU Savings Share Account. You are eligible to join LFCU if you live, work, worship, or attend school or have a business or other legal entity in Lebanon County. You are also eligible to join if you have an immediate family member who lives, works, worships or attends school in Lebanon County.  Member's LFCU accounts must also be in good standing with no delinquencies to qualify. The $25 dollar IRA deposit will be made as a general contribution type at time of IRA Account opening. LFCU is Federally Insured by NCUA.

Traditional IRAs

If you do not want to lock into a fixed rate, you may set up a retirement plan in share form. Features of Traditional IRA Shares include:

  • No minimum balance to open or earn dividends
  • Dividends are earned on all balances
  • Current year contributions may be made at any time(You may start or stop automatic payments at any time)
  • Previous year contributions are accepted from January through April 18
  • Under the age of 50, you can contribute $5,500 annually
  • Over the age of 50, you can contribute $6.500 annually
  • Contributions may not be made once you turn age 70 1/2

With a traditional IRA, whether deductible or non-deductible, the taxes are deferred on earnings until you take distributions. You will not pay any taxes on the interest you earn on your IRA until you make withdrawals. In addition, the non-working spousal IRA contribution is $5,500.

Contributions to an IRA can be made through direct deposit, mail or by coming into our office.

Traditional IRA Certificates

Traditional IRA Certificates offer tax deferred savings at a fixed rate. Other features include:

    • Dividends  are earned from the date of deposit to date of withdrawal
    • Dividends  are based on the average daily balance and are credited to the certificate monthly

Need more information on IRAs?
Call (717) 272-2210 or (800) 489-5328

PLEASE NOTE: PLEASE CONSULT A TAX ADVISOR TO DETERMINE IF THIS OPTION IS FOR YOU.

Roth Contributory IRAs

The Roth IRA creates an opportunity to make nondeductible contributions to an account, where the earnings are tax-free and penalty-free if the account is open for five years and the account holder meets any of the following guidelines:

  • They are at least the age of 59 ½ years of age.
  • They have become permanently disabled.
  • If a distribution is made to the account beneficiary as a result of their death.
  • They are purchasing a new home for the first time.

Contributions to a Roth IRA are allowed at any age as long as the IRA owner has compensation for the tax year for which the contribution is made. You may have a traditional IRA and a Roth IRA, but the combined contributions in any tax year cannot exceed $5,500, age 50 and over $6,500. Unlike the traditional IRA, the money you contribute has already been taxed; therefore the principal amount is never subject to taxes. In addition, you can continue contributions after the age of 70 ½ and there is no requirement to begin withdrawals at the age of 70 ½.

Taxpayers can convert Traditional IRA funds to a Roth Conversion IRA. LFCU keeps Roth Conversion IRA funds separate from Roth Contributory IRA funds.

PLEASE NOTE: PLEASE CONSULT A TAX ADVISOR TO DETERMINE IF THIS OPTION IS FOR YOU.

Roth Conversion IRAs

The Taxpayers Relief Act of 1997 gave taxpayers the ability to convert their current IRA funds into a Roth if the IRA owner’s single or joint modified adjusted gross income is less than $100,000. This converted money is kept separate from a Roth Contributory IRA at LFCU. The deductible money that is converted will be taxed upon conversion.

Withdrawals may be subject to both tax and penalty depending on whether the reason for withdrawal is considered to be a qualified distribution.

PLEASE NOTE: PLEASE CONSULT A TAX ADVISOR TO DETERMINE IF THIS OPTION IS FOR YOU.

Coverdell Educational Savings Account

The Coverdell ESA's sole purpose is to allow parents, grandparents, and other interested persons to set up to $2000 aside each year to help pay the higher-education expenses of the child named on the account. The account is set up and reported under the child’s Social Security number. Earnings accumulate tax-free and withdrawals are tax-free if used for vocational, undergraduate, or graduate education expenses by the time the person is 30 years of age.

This ESA allows up to $2000 in nondeductible contributions for a child under the age of 18. Therefore, if both parents choose to contribute to a Coverdell ESA, the total of their contributions cannot exceed $2000. If the funds in the Coverdell ESA are not used by the child, the Coverdell ESA may be rolled-over to another child’s Coverdell ESA within the same family.

PLEASE NOTE: PLEASE CONSULT A TAX ADVISOR TO DETERMINE IF THIS OPTION IS FOR YOU.

SEP IRAs

Consider this no hassle plan for small businesses-easy, low-cost ways to save for retirement

What is a SEP Plan?

  • A simplified employee pension (SEP) plan is an employer-funded retirement plan that allows employers or self-employed individuals the option to make contributions into their own and each eligible employee’s Traditional IRA.

What type of business is eligible to set up a SEP plan?

  • SEP plans are available to all types of business, including sole proprietorships, partnerships, and corporations, as well as individuals with self-employment income.

Who is eligible to participate in a SEP plan?

  • Your employer may require employees to meet the following criteria to be eligible.
  • Be at least age 21
  • Have worked for the employer during at least three of the preceding five years (for any period of time, however short)
  • Have earned at least $550 in compensation from the employer for the year.
  • Not be covered under a collective bargaining agreement.
  • In addition, your employer can exclude employees who are nonresident aliens with no U.S. earned income.
  • Your employer can use less restrictive requirements or have no eligibility requirements at all. But employers cannot make these requirements any more restrictive.  For example, your employer cannot require that employees be at least age 25, but could set the minimum age at 18.

What is the SEP contribution limit?

  • For 2018, the maximum annual SEP contribution that your employer can make to your Traditional IRA is 25 percent of your annual compensation up to a maximum contribution of $55,000.
  • For employees, compensation generally is defined as the income reported on the employee’s Form W-2 statement. For self-employed individuals, compensation generally is defined as net business income from the business sponsoring the SEP plan.  The maximum amount of compensation that can be considered in computing SEP contributions in 2018 is $275,000.

What is the SEP contribution deadline?

  • Your employer must notify all eligible employees of the contribution amount by January 31 of the year following the year for which the contribution was made, or within 30 days of the contribution, whichever is later. Your employer has until its federal tax return due date, including extensions, to make contribution.

Can you still make a regular Traditional IRA contribution if you participate in a SEP plan?

  • If you are under age 70 ½ and have eligible compensation, you may contribute to a Traditional IRA in addition to receiving SEP plan contributions (or other employer-sponsored retirement plan contributions).  But your ability to take a tax deduction for your Traditional IRA contribution may be affected because you will be considered an “active participant” in an employer-sponsored retirement plan.

PLEASE NOTE: PLEASE CONSULT A TAX ADVISOR TO DETERMINE IF THIS OPTION IS FOR YOU.

 

 

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If you have any questions, please contact us during normal business hours.

By email: lebfcu@lebanonfcu.org

By phone: 717-272-2210 option 3 to speak to a Member Service Representative.