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FAQs: Questions about Bank IRAs

  • Hide What is an IRA?

    An IRA is an individual Retirement Account that may provide either a tax-deferred or tax-advantage way for you to save for retirement. There are many different types of IRAs but Roth, Traditional, and Rollover IRAs are the most common. An IRA is simply an account. In an IRA some people invest in mutual funds or stocks, while others may choose bank products such as CDs and money market savings. Each IRA has certain eligibility requirements and each has unique features. Finding the right IRA for you will largely depend on which IRAs you are eligible for and which one offers the benefits that are most important to you.

  • Show What is a Roth IRA?

    A Roth IRA is a retirement savings account that provides federally tax-free growth and withdrawals once it has been open for 5 years and you are 59½ years of age. Contributions can be withdrawn at any time, tax and penalty-free. You can use a Roth IRA to hold investment products such as mutual funds, stocks, bonds, and ETFs or bank products like CDs and money market savings.

  • Show What is a Traditional IRA?

    A Traditional IRA is a retirement savings account that provides federally tax-deferred growth. Withdrawals after the age of 59½ are taxed at your tax rate at that time. Contributions may be tax-deductible. You can use a Traditional IRA to hold investment products such as mutual funds, stocks, bonds, and ETFs or bank products like CDs and money market savings.

  • Show What are the differences between Roth IRA and a Traditional IRA?

    While Roth and Traditional IRAs are both good choices when saving for retirement, there are many differences to keep in mind:

    • Any earnings in Roth IRA are federally tax-free. Earnings in a Traditional IRA are tax-deferred until withdrawn in retirement when they are taxed at your current rate.
    • Contributions to a Roth IRA can be withdrawn at any time, penalty-free. Withdrawals from a Traditional IRA before the age of 59½ are subject to taxes and a 10% federal penalty.
    • Anyone with earned income under the age of 70½ can contribute to a Traditional IRA. Roth IRAs are restricted to those who do not exceed certain modified adjusted gross income limits.
    • Traditional IRA contributions may be tax-deductible. Roth IRA contributions cannot be deducted.
  • Show Is there a limit to how much I can contribute to an IRA?

    Yes. Your contribution limit depends on your age and earned income. The maximum amounts allowed by law that you can contribute to your IRA in 2014 are $5,500 if you are under the age of 50 and $6,500 if you are 50 or older. For 2015, you may contribute $5,500 if you are under the age of 50 and $6,500 if you are 50 and older. If your earned income is less than these amounts, the maximum allowable contribution is 100% of your earned income.

  • Show If I contribute to a 401(K), 403(b) or other employer-sponsored plan, can I also contribute to an IRA?

    Yes, if you are currently investing in a 401(k) or other employer-sponsored plan, you are still eligible to open and contribute to an IRA.

  • Show What is a Rollover IRA and why would I want to establish one?

    A Rollover IRA is a retirement account specifically designed to receive transfers from a previous employer-sponsored retirement plan, such as a 401(k) or 403(b). By rolling over this account directly:

    • You can consolidate your retirement accounts for simplified management and greater control.
    • You get a wider variety of investment choices, letting you find investments that more closely fit your financial goals and style.
    • You maintain the tax-deferred status of your retirement savings while allowing them the opportunity to grow.
  • Show What’s the difference between a Rollover and a Transfer?

    It’s all about where the money is coming from. Open a Rollover when the money is coming from an employer-sponsored savings plan such as a 401(k). If your savings are already in a Traditional or Roth IRA, you simply open a new Traditional or Roth account and transfer your deposits or investments.

  • Show What is the difference between a Direct Rollover and Indirect Rollover?

    With a Direct Rollover, the check from your employer sponsored plan is made out to the financial institution where you opened your IRA "for the benefit of" you. Since this money is deposited directly from the 401(k) to the IRA, no taxes are withheld.

    With an Indirect Rollover, the check is made payable to you. Your former employer withholds a mandatory 20% for taxes. You have 60 days to deposit these funds into an IRA, and must make up the 20% yourself, otherwise the 20% withheld will be considered a taxable distribution and only 80% will continue to grow tax-free or tax-deferred. In addition, if you are under age 59½ you would be subject to an additional early withdrawal penalty of 10%.

  • Show I have a Rollover IRA somewhere else; can I transfer that?

    Absolutely. Once you've opened a Rollover IRA it's easy to move your old IRA into it with assistance from our Retirement Help Desk.