IRA/ESA Accounts

What is a Traditional IRA or Rollover IRA?

A Traditional Individual Retirement Arrangement (IRA) is an investment account geared for investors who want to build a nest egg for retirement. You're allowed to stash away a set amount every year. Plus, interest, dividends, and capital gains in the account aren't taxed until you withdraw the funds. As a bonus, some contributions you make into a Traditional IRA are tax-deductible.

A Rollover IRA is used to hold assets that were previously held in an employer's retirement plan, like a 401(k). There is no limit on the amount you can roll over.

Tip: For specific information about Traditional/Rollover IRAs and tax related questions, please consult a tax advisor and review IRS publication 590.

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What is a Roth or Conversion IRA?

A Roth Individual Retirement Arrangement (IRA) is one of the more recent investment options available to help individuals prepare for retirement. To open and contribute to a Roth IRA, customers must meet certain eligibility requirements set by the IRS, and the amount that can be contributed each year is limited.

Roth IRA contributions are made after-tax, but earnings are not taxed, and neither are eligible withdrawals.

Tip: Contribution limits indicate the total amount a taxpayer may annually contribute to their combined IRA accounts. For specific or tax-related questions about Roth IRAs, please consult a tax advisor and review IRS Publication 590.

A Roth Conversion IRA is an account that is used to hold assets converted from a Traditional or Rollover IRA.

Tip: The amount converted from a Traditional or Rollover IRA is subject to regular income taxes in the year of conversion. For specific or tax-related questions about Roth Conversion IRAs, please consult a tax advisor and review IRS Publication 590.

What is an Education Savings Account (ESA)?

An Education Savings Account (ESA – also known as a Coverdell ESA) is used to squirrel away funds for qualified education expenses of the Designated Beneficiary. Contributions are made on an after-tax basis, and earnings generated may not be subject to taxes (upon a qualified distribution).

Important Tip: Contributions made to an Education Savings Accounts do not provide a tax break or tax deduction for the contributor.

Are there administration charges for IRAs or ESAs?

Nope. Nada. Zilch. Administration fees just don't jibe with us. There is no administration charge for your IRA or ESA.

How much can I contribute into my IRA (or Roth IRA) each year?

The IRS sets the yearly contribution limit, and the maximum amount you contribute varies from year to year. As a bonus, individuals over the age of 50 can make a "Catch Up Contribution," which is a higher dollar amount than the normal, maximum yearly contribution.

If you own multiple IRAs, the annual contribution limit applies to all IRAs you own.

Maximum Annual IRA Contributions
Tax Year Maximum Contribution Amount Maximum Contribution
Amount (age 50 and older)
2013 $5,500 $5,500 + $1,000 Catch Up Contribution
2014 $5,500 $5,500 + $1,000 Catch Up Contribution

Tip: If your total earned income for a tax year is less than the maximum contribution amount, you may not contribute in excess of your total earned income for that year.

Lastly, trade commissions count toward the annual contribution limit.

How much can I contribute into my ESA each year?

The IRS has set the maximum yearly contribution for an ESA (Education Savings Account) at $2,000 per minor. If multiple ESAs have been opened for the benefit of the Designated Beneficiary, the total of all contributions to all ESAs may not exceed the $2,000 annual contribution limit.

In addition to the maximum contribution amount, there are income limits for the individuals who are making the contributions (such as parents, grandparents, friends, etc.). Corporations and other entities may make contributions to an ESA without being restricted by these income limits:

Income Limits For ESA Contributions
Tax Filing Status Income
Single MAGI below $110k (Subject to phase-out starting at $95k)
Joint MAGI below $220k (Subject to phase-out starting at $190k)

Tip: Individuals who contribute to an Education Savings Account aren't required to have earned income. Contributions made to an Education Savings Accounts do not provide a tax break or tax deduction for the person who makes the contribution.

For the most up to date tax and contribution information, and/or help determining your ability to contribute to an Education Savings Account, please contact your tax advisor.

Tip: Trade commissions count toward the annual contribution limit.

What distribution options are available for IRA/ESA accounts?

IRA/Roth IRA
You have the option of selecting from the following choices as the reason for making your withdrawal request:

  • Normal: You are age 59½ or older.
  • Early with no known exception: You are under age 59½—a 10% early distribution penalty may be assessed by the IRS on your individual tax return.
  • Early with exception: You're under age 59½ and a known penalty exception applies (including substantially equal periodic payments, first time home purchase, IRS levy, or qualified medical, health insurance or higher education expenses).
  • Disability: Please include a copy of a physician's statement or letter from the Social Security office confirming your disability along with the required form.
  • Death Beneficiary Distribution: Along with a paper-form distribution request, mail a certified copy of the death certificate for the account owner. All paperwork must be originals—no photocopies or faxes allowed.
  • Removal of Excess Contribution: Requires a paper form—on the form, please indicate the amount you've over-contributed to your IRA, any applicable earnings, and the tax year associated with the contribution you wish to have distributed.

ESA
You have the option of selecting from the following choices as the reason for making the withdrawal request:

  • Normal: The distribution is used for education expenses—view additional information about qualified and non-qualified education expenses.
  • Disability: Please include a copy of a physician's statement or letter from the Social Security office confirming your disability along with the required form.
  • Death Beneficiary Distribution: Along with a paper-form distribution request, mail a certified copy of the death certificate for the account owner. All paperwork must be originals—no photocopies or faxes allowed. We will contact you if additional paperwork is required.
  • Removal of Excess Contribution: You have over-contributed to your ESA and have decided to remove the excess amount—you'll need to designate the excess contribution amount, applicable earnings and tax year associated with the contribution you wish to have distributed (requires form to be filled out).