Traditional IRA

The Traditional IRA is a tax deferred account that allows you to take a tax deduction on your Federal Income Taxes for the tax year the contribution was made to the IRA if you qualify.

Eligibility

Anyone younger than age 70 ½ for the entire tax year who has compensation is eligible to contribute to a traditional IRA.

Contribution Limits

You may deposit any amount up to 100 percent of your compensation or the maximum annual contribution amount, whichever is less. Your traditional IRA contributions must be coordinated with your Roth IRA contributions. Your combined maximum contribution to both types of IRAs is the maximum annual contribution amount or 100 percent of your compensation, whichever is less.

For tax year 2007 the maximum annual contribution limits is $4,000.00
For tax year 2008 the maximum annual contribution limit is $5,000.00
For tax year 2009 and after the maximum annual contribution limit is $5,000 plus cost of living adjustment

Catch-up contributions are for individuals age 50 or older that may do an additional contribution.

The current catch-up contribution amount is $1000.00

Distributions from the IRA

You can withdraw funds from your traditional IRA at any time. However, an IRS 10 percent premature distribution penalty tax is imposed if the withdrawal is made before you reach the age of 59 1/2. Also there will be an institution penalty if your IRA certificate is still in term according to your certificate of deposit agreement.

Required Minimum Distributions

You must begin to take minimum distributions from your account by April 1 following the calendar year you reach age 70 ½. All subsequent years' required minimum distributions must be distributed by December 31 of each year. If you wait to take your first required distribution until April 1 of the following year you reach age 70 ½ you will be required to take another distribution by December 31 of the same year. This will create two taxable distributions for the same tax year.

If you fail to take a required distribution there is a large IRS penalty. Anchor Bank can set you up on an automatic distribution to complete this transaction and take the worry away.

At Anchor Bank, we strive to deliver ‘Banking beyond the ordinary’ every day.

For more information call or visit any Anchor Bank location or call us at 360-532-6222 or toll-free at 800-562-9744 for a quote and application package.

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