Retirement Accounts in Vermont

Individual Retirement Accounts (IRAs)

Start saving for your retirement now with an Individual Retirement Account. Whether you are looking for an IRA share account or certificate, we can provide you with an IRA solution.

The IRA Share Account helps you save for retirement with ease. Deposits can be made any time, or you can arrange payroll deduction deposits. As your retirement funds grow, you can lock in a higher rate of return with an IRA Certificate. IRA Certificates are available with a minimum deposit of $500.00 or more. We offer a variety of terms. Our current IRA Certificate rates can be found on our Savings Rates page, or you can visit one of our branches to learn more about your IRA account options.

Contribution Limits

Traditional and Roth IRA contribution limits (as of 2024):

  • $7,000 for individuals under age 50
  • $8,000 for individuals aged 50 and older

There is no limit on how many IRA accounts an individual can have and where they are held, only on how much money can be contributed per year. The contribution limit is a gross total, not per IRA account. It is the responsibility of the IRA owner to keep track of total contributions made to all IRA accounts throughout the year.

Taxes & Penalties

State and federal taxes on withdrawals (traditional and SEP IRAs) as of 2024:

  • Federal: 10%
  • Vermont: 3%

Withdrawals from an IRA account before the owner is 59½ will incur a 10% early withdrawal penalty from the IRA (some exceptions apply).

The Credit Union (per your request) can withhold and send taxes owed on a withdrawal to the IRS and state on your behalf. You can decline to have us send taxes to you, but you will be responsible for paying them when you file your income taxes. You can also elect to withhold more than the minimum tax amounts.

Traditional IRA

Contributions to the Traditional IRA may be tax-deductible (consult with your tax advisor). Taxes will be applied to the interest earned during the life of the IRA, but only when drawing money out of the account. In other words, you can use “pre-tax” dollars to make contributions to this account.

When a member retires and withdraws this money, they may pay a lower tax on this income than when employed and earning a higher salary. If it becomes necessary to withdraw money from this account before age 59½, a penalty may be charged. Periodic payments must begin from the Traditional IRA at the age of 73.

  • Contributions are made on pre-tax income; contributions are deducted from the owner’s gross income (reduces taxable income) the year they are made. Contributions can be made anytime until the filing deadline for the tax year in which they apply.
  • Taxes are paid on funds as they are withdrawn from the IRA.
  • Withdrawals count as income the year they are withdrawn.
  • Required minimum distributions (RDMs) must be taken by owner when they reach a certain age (73 years old as of 2024) for the government to collect taxes.

Roth IRA

A Roth IRA requires payment of income tax on the contributions made – meaning your contributions are in “after-tax” dollars. Qualifying withdrawals are tax-free. Owners of this type of IRA must hold this account for a period of five years and meet one of the several criteria to make penalty-free, tax-free withdrawals of both contributions and earnings.

  • Contributions are made on taxed income; contributions are NOT deducted from the owner’s gross income.
  • Interest earned on a ROTH IRA is tax-free.
  • Taxes are not withheld at withdrawal because they were paid by the owner when the funds (income) were earned.
  • Withdrawals of the earnings from a Roth IRA will be taxed if they are made within 5 years of the first contribution year.
  • There is no RMD on a Roth IRA because all contributions are made on taxed income.

Coverdell Education Savings Account

(ESA – previously known as the Educational IRA)

This account can be opened for children under the age of 18 to help pay for college expenses. Contributions are nondeductible, but earnings are tax-free upon withdrawal if used for educational expenses before the child’s 30th birthday.

SEP (Simplified Employee Pension) IRA

Employer-sponsored IRA opened in an employee’s name. Employers are the only ones able to make contributions into this type of IRA.

SEP contributions limits (per irs.gov):

Employer’s contributions made to an employee’s SEP IRA cannot exceed lesser of: 25% of the employee’s compensation of $69,000 for 2024.

IRA Shares

A Base Shares account is required to open an IRA Shares account.

IRA Shares can be opened in tandem with an IRA Certificate to give you the best return on your investment.

The IRA Shares account will allow you to save throughout the year, and then the funds can be rolled over into the IRA Certificate (at the Certificate’s maturity) to earn a higher APY.

Features

  • No minimum balance requirement.
  • IRA savings product with a higher annual percentage yield  (APY) than our Base Shares account.
  • Contributions can be made into an IRA Shares account at any time (up to the yearly maximum contribution limit).
  • Dividends are paid monthly.
  • Statements (paper or electronic) are generated quarterly but can be changed to monthly upon request.
    • Can be combined with other accounts into one monthly or quarterly statement.

Benefits

An IRA Share account empowers our members to start saving for their retirement.

You can set up weekly, biweekly, or monthly automatic contributions into an IRA Shares account from any 802CU or external account.

Traditional IRAs: Deposits into an IRA Shares account can yield tax benefits for you.

Roth IRAs: Returns tax-free earnings on dividends.

IRA Certificates

A Base Shares account is required to open an IRA Certificate.

Features

  • $500 minimum balance.
  • Higher APY (based on term) than IRA Shares account, but contributions after the initial funding/opening of the account are not allowed.
  • Withdrawals made before the certificate’s maturity date are subject to an early withdrawal penalty (up to 180 days’ dividends depending on the term of the certificate).
  • Dividends are paid monthly.
  • Statements (paper or electronic) are generated quarterly but can be changed to monthly upon request.
    • Can be combined with other accounts into one monthly or quarterly statement.

Benefits

Ideal for rollovers, when moving an existing IRA or retirement account from another institution to 802 Credit Union with no expectation of making additional contributions or withdrawals.

Roth IRAS provide a higher yield of interest-free earnings (dividends) than IRA Shares accounts.

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Already a Member? Open Your Retirement Account In-Branch.

As a member of 802CU, you’re already set to unlock more financial opportunities. To open your retirement account, visit one of our branches today and continue maximizing your financial potential with competitive products and personalized service.

 

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