Planning for Retirement
Planning for Retirement
Plan for Retirement Wisely With An IRA
An Individual Retirement Account (IRA) is one of the best and easiest ways to save for your future.
Depending on the type of IRA you choose, the interest you earn may either be tax deferred or tax free and the contributions
you make may even be tax deductible. Consult with your tax advisor to determine your limitations for tax deductions.
Traditional IRA
With a Traditional IRA, you may be eligible to deduct all or part of your IRA contribution from your taxable income.
You pay no taxes on the interest earned on this IRA until you withdraw the funds. Penalties may be imposed for early,
unqualified withdrawls of funds.
Traditional IRAs include:
A distribution freature that eliminates the 10% penalty tax on qualified early withdrawals.
Qualified withdrawals include the purchase of a first home and higher-education expenses.
An increase in the Modified Adjusted Gross Income (MAGI) levels for active participants of employer-sponsored retirement
plans.
The allowable MAGI limit for single taxpayers is between $53,000 and $63,000.
The allowable MAGI limit for joint tax-return filers both partipating in an employee sponsored retirement plan
is between $85,000 and $105,000.
The allowable MAGI limit for joint tax return filers with only one spouse participating in an employee-sponsored
retirement plan is between $159,000 and $169,000.
Roth IRA
One of the newest IRAs available is the Roth IRA. Features include:
Tax free qualified distributions when held for atleast five years. Penalties may be imposed for
early, unqualified withdrawals of funds. Contributions are not tax deductible.
No required distribution during the account holder's lifetime and contributions may be made after age 70 1/2.
Qualified distributions are: 1. The purchase of a first home (up to $10,000 lifetime maximum); 2. When the account holder reaches age 59 1/2; 3. When the account holder dies or becomes disabled.
Available to a single tax-return filers with a MAGI up to $116,000.
Available to married couples filing a joint tax return with a MAGI up to $169,000.
You may contribute to both a Roth IRA and a Traditional IRA, as long as the total contributions do no exceed $5,000 for the tax
year, or $6,000 if you are 50 years or older.
Coverdell Education Savings Account (formerly The Education IRA)
The Coverdell Education Savings Account (ESA) is a trust or custodial account created only for the purpose of paying for
qualified higher education expense. It is not a retirement account.
Contribute up to $2,000 a year for a designated beneficiary under age 18; or older if he/she is a special needs beneficiary.
Contributions are not tax deductible.
Distributions and earnings are tax free if the funds are used for qualified higher-education expenses.
Tax-free distributions include tuition, room and board, and books. Also include certain computer technology,equipment, internet access or related services.
Funds must be withdrawn before the beneficiary reaches the age of 30, unless a special needs beneficiary.
FUnds can be rolled over once a year, tax free to a beneficiary under the age of 18 provided that beneficiary is a member of the same family as the current designated beneficiary.
The allowable MAGI limit for single taxpayers is less than $110,000.
The allowable MAGI limit for joint tax-return filers is less than $220,000.
Smart IRA Choices
Commerce Bank offers Traditional and Roth IRAs and Education Savings Account in a choice of options to suite your
financial needs and retirement goals:
1. IRA Certifcate of Deposit
2. Add-On IRAs
3. Self-Directed IRAs
