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Traditional vs Roth

Prepare for Retirement Today

It's never too early to start thinking about retirement. Whether retirement is many years away or just a few years into the future, preparing for it is important. With the uncertainty of the future of social security and many employers offering 401(k) or other defined contribution plans, instead of pensions, saving for retirement is your responsibility. During retirement, it is crucial you have enough income to cover expenses.

You can help make sure you are financially prepared by adding a Heartland Credit Union IRA to your retirement plan.

What is an IRA?

An IRA (individual retirement account) is a form of retirement plan that offers certain tax advantages. The two most common accounts are Traditional IRAs and Roth IRAs.  Each offers different tax advantages and benefits, so it's important to see which one is right for you. Click on the Traditional vs Roth tab for a comparison table.

HCU also has a Coverdell Educational IRA to help plan and save for your child's education. Click here to learn more about Coverdell Educational IRAs.

Benefits of Heartland Credit Union IRAs

  • Excellent long-term savings investment
  • Tax advantages
  • Flexible options
  • Choose from Traditional, Roth and Coverdell Educational IRA
  • Easy to manage

 


Traditional vs Roth:

    Traditional IRA
      Roth IRA      
Contributions   Tax-deductible, subject to certain limitations.       Not tax-deductible.      
Earnings   Taxes are deferred until you begin withdrawing funds.       Tax-free, subject to certain limitations.      
Withdrawls    Taxable.       Tax-free withdrawal of original contribution; potentially tax-freewithdrawal of earnings if part of a qualified withdrawal.      
                   
Maximum Contributions    Up to $5,500 for 2014 and 2015, or if you are age 50 and older, up to $6,500 for 2014 and for 2015        Up to $5,500 for 2014 and 2015, or if you are age 50 and older, up to $6,500 for 2014 and for 2015.      
Eligibility   Anyone with earned income may contribute up to age 70-1/2.       No age restrictions.      
                   
Tax/penalty Consequences   All earnings and deductible contributions are taxable upon withdrawal. Penalties will be assessed if withdrawals are taken before age 59-1/2, or if withdrawals are not taken by age 70-1/2.       Contributions can be withdrawn anytime without taxes or penalties. Earnings can be withdrawn, without taxes or penalties, if you are 59-1/2 and your account has been open five years or more.      
Distribution Requirements   Required minimum distributions upon reaching age 70-1/2.       None.      
Exceptions to Penalties   Some exceptions are made if funds are used for a first-time home purchase, education or certain medical expenses.        Some exceptions are made if funds are used for a first-time home purchase, education or certain medical expenses.