IRA's are one of the best ways to save for retirement. When you invest in an IRA, all earnings accumulate in your account on a tax-deferred basis. Also, depending on the type of IRA you have, distributions may be tax free, provided certain conditions are met. The combination of tax deferral and compounding can help your retirement savings in an IRA to increase faster than they would in an account on which you pay taxes every year. Catch-up provisions now allow investors age 50 and over to contribute an additional $500 per year, starting in tax year 2002.
Types of IRA's
Traditional IRA: An IRA for which contributions made into it may be tax deductible under certain circumstances. Each tax year you can contribute up to $3,000 of your earned income to a Traditional IRA. In addition, a non-working spouse can contribute $3,000 to a Traditional IRA provided the working spouse has earned income equal to or greater than the total amount contributed to both IRA's.
Withdrawals from a Traditional IRA are typically not made before age 59 1/2 without penalty except under special circumstances. Withdrawals are taxable as ordinary income, but the taxpayer may often be in a lower tax bracket after retirement when the withdrawals are commonly taken.
Roth IRA: An IRA into which eligible taxpayers may make after-tax contributions and may receive tax-free withdrawals under certain conditions. To make a contribution to your Roth IRA you must have earned income (or your spouse must have earned income) and your modified adjusted gross income for the tax year in which you are making the contribution cannot exceed certain limits. You may contribute up to 100% of your earned income or $3,000, whichever is less, into your Roth IRA.
Withdrawals of your original contributions to your Roth IRA can be taken at any time without penalty and are not subject to taxation. Withdrawals of the earnings generated by your Roth IRA can also be penalty free, provided your Roth IRA meets a five-year holding period condition and other qualification requirements.
Please contact one of our Customer Service Representatives for more information and to discuss how you can make Traditional and Roth IRA's an integral part of your retirement and financial planning.
I.R.A. Investment Options
IRA Passbook Account: A savings account into which you can make contributions to your IRA in any amount at any time. This allows you to fund your IRA steadily and gradually in smaller increments rather than having to wait until you can accumulate a larger sum to deposit into your IRA all at once. We can even assist you with this by setting up an automated transfer into your IRA Passbook Account from your Mars National Bank deposit account.
Time Certificates of Deposit: For making less frequent and minimum contributions to your IRA of at least $500.00 or transferring funds from another IRA investment or other retirement plan, Mars National Bank offers Time Certificates of Deposit in terms ranging from one month to five years. CD's allow you to lock in a rate of return on your investment over a specified period of time.