USSFCU offers both Traditional IRAs and Roth IRAs to help its members save for retirement. Either may be opened as a savings account or a term certificate. Despite some different characteristics detailed in the comparison below, both Traditional and Roth IRAs at USSFCU share the following common elements:

• Competitive dividend rates above standard savings rates
• No set up fees or monthly/annual maintenance fees
• A very low $5 minimum balance
• The ability to purchase Share Certificate(s) with IRA funds
• A $6,000 per year contribution limit¹  2020 and 2021 contribution limit
• Additional $1,000 “catch-up” contributions allowed for members ages 50 and above

Which approach is best for you? Traditional, Roth, or both? Give us a call and we’ll help you chart the best course for you and your family!

¹ Annual contribution amount may change.

The main difference between Traditional and Roth IRAs, both of which are tax-advantaged retirement savings tools, is how these accounts are treated by the tax code.

A Traditional IRA from USSFCU may accept contributions of pre-tax or after-tax dollars and the dividends grow tax-deferred. When you make withdrawals after age 59½, they are treated as current income. In addition, contributions are potentially tax deductible depending on your filing status and income.

A Roth IRA from USSFCU is funded only with after-tax income. Therefore, contributory funds may be withdrawn at any time without tax penalties. When members make qualified withdrawals from their Roth IRAs after age 59½, earnings are not taxed.

Aside from these fundamental differences, Roth IRAs and Traditional IRAs also differ in a few other ways, which are described below.

Traditional IRAs

• Anyone under age 72 with earned income may open a Traditional IRA
• Contributions are deductible from state and federal tax*
• Earnings are tax deferred until withdrawal
• Withdrawals may begin at age 59½ and are mandatory at age 72 when members are often in a lower tax bracket
• Early withdrawals are subject to penalty**

Roth IRAs

• No age limits for eligibility
• Eligibility is subject to income limits based on filing status
• Contributions are NOT tax deductible
• No penalty for early withdrawal of contributory funds
• Early withdrawals on earnings subject to penalty**
• Earnings are 100% tax free on qualified distributions
• No mandatory distribution age

*Subject to some minimal conditions. Consult a tax advisor.

**Certain exceptions apply, such as qualifying higher education expenses, first time home purchases, etc.

The Traditional and Roth Contribution Limits are the same for 2020 and 2021:

Total contributions to all of an individual’s Traditional and Roth IRAs may not be more than:

• $6,000 ($7,000 if you're age 50 or older),
• Or your taxable compensation for the year, if your compensation was less than this dollar limit.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act:

• Raised the age at which individuals must begin taking RMDs from their retirement accounts to 72. 
• Allows taxpayers with earned income to make Traditional IRA contributions at any age.