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– Amy C.
Member Since 2010

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  Traditional Roth Coverdell Education Savings Account
Highlights A retirement savings plan for those who have taxable compensation and are under the age of 70½ in the contribution year.

Participation in an employer sponsored retirement program may reduce the tax deductibility of your Traditional IRA contributions.

There is no income limit on contribution eligibility.

A retirement savings plan for individuals with taxable compensation and who meet income limit eligibility guidelines.

There is no age limit on contributions.

The Roth IRA potentially has greater tax benefit, such as possible tax-free earnings and no mandatory distribution requirements.

Savings plan to help individuals save for a child's higher education expenses.
2016 Contribution Limits $5,500 or 100% of earned income, whichever is less $5,500 or 100% of earned income, whichever is less $2,000
2016 Catch-Up Provisions An additional $1,000 for individuals age 50 and over An additional $1,000 for individuals age 50 and over None
Tax Deductibility1 Possible deductions1
(see IRS Publication 590)
None None
Tax Advantages1 Taxes on deductible contributions and earnings are deferred until a distribution is taken Qualified distributions are tax-free (See Distributions below) Withdrawals of earnings and contributions may be tax-free to the recipient if used for qualified education expenses
Income Eligibility Effect of Modified AGI on deduction if covered by a Retirement Plan at work
  • Married filing jointly, where the spouse making an IRA contribution is covered by a retirement plan at work, deductions are phased out between $98,000 and $118,000
  • IRA contributor who is not covered by a retirement plan at work, but is married to someone who is, deductions are phased out when the couple's income is between $184,000 and $194,000
  • Single or head of household covered by a retirement plan at work, deductions are phased out between $61,000 and $71,000
Effect of Modified AGI on Roth IRA Contribution:
  • Married filing jointly or qualifying widow(er), contributions are phased out between $184,000 and $194,000
  • Married filing separately and covered by a retirement plan at work, contributions are phased out between $0 and $10,000
  • Single or head of household contributions are phased out between $117,000 and $132,000
The individual funding the Coverdell Education Savings Account is not required to have earned income. However, if income is earned, total income cannot exceed $220,000 for married individuals.
Distributions Distributions prior to age 59½ are generally subject to a 10% IRS penalty (See Penalty-Free Distribution Exceptions for exceptions)
Distributions must begin no later than April 1, following the Member's 70 ½ birthday.
In order to be considered a "Qualified Distribution", the Roth IRA plan must have been open for at least 5 years and one of the following:
  • Age 59 ½ or older
  • Death
  • Disability
  • First-time Home Purchase
Distributions of contributions are tax-free and IRS penalty-free at any time.
Distributions are not required while the Roth IRA owner is living.
The funds must be completely distributed by the beneficiaries' 30th birthday. Exceptions may apply.
Penalty-Free Distribution Exceptions Death, disability, substantially equal periodic payments, first-time home purchase, post-secondary education expenses Death, disability, first-time home purchase Funds can only be used for beneficiaries' education expenses. All other distributions may be assessed a penalty
Rollovers and Transfers Rollovers and transfers to and from other Traditional IRAs or qualified employer sponsored retirement plans are permitted Rollovers and transfers to and from other Roth IRAs are permitted Rollovers and Transfers to and from other Coverdell ESAs are permitted
Annual Contribution Deadline  IRS stated annual tax filing deadline IRS stated annual tax filing deadline IRS stated annual tax filing deadline

 

1For specific tax advice, consult a qualified tax professional.

 

Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/ SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst Federal Credit Union to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
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