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Comparing Your IRA Options

If you contribute $96.15 per week or $416.666 per month, you will accumulate almost $5,000 by year end. Sign up for Direct Deposit Today!

Dakotaland Federal Credit Union offers several investment certificates and Individual Retirement Accounts to make planning for your financial future easy. We believe that IRAs are one way to help secure your dreams for the future. Take a look at our Retirement Savings Calculator and Current Rates.

An IRA lets you make a contribution each year (in some cases it's tax-deductible) and then accumulate earnings tax deferred until they are withdrawn. Dakotaland Federal Credit Union offers the following investment options.

Traditional IRAs

A Traditional IRA is a type of retirement plan that has been in existence since 1975. Traditional IRAs offer tax-deferred earnings, and the possibility for tax-deductible contributions. These tax advantages make the traditional IRA a powerful tool in creating a balanced, long-term savings plan.

Contributions to Traditional IRAs (under certain circumstances) and the earning on them are not taxed until withdrawal. At that time, withdrawals are taxed at your income tax rate. Ten percent penalty taxes may apply if you withdraw before age 59-1/2.

You can contribute up to $5,000 a year or 100% of your earned income, whichever is less. If you are married, you can contribute up to $10,000 or 100% of your combined income, whichever is less, between each spouse's IRAs. Workers age 50 and older can play "catch-up" with their retirement savings by contributing up to $1000 a year over the maximum contribution limits. You can make contributions up to April 15 for the prior tax year.

You can make tax penalty-free withdrawals for several reasons. You can pay first-time home-buying expenses ($10,000 lifetime limit) for you, your spouse, children, grandchildren, or parents. You can also pay qualified higher education expenses for you, your spouse, children, or grandchildren not covered by other education assistance.

Penalty-free withdrawals are also allowed for death, disability, medical expenses, that exceed 7.5% of your adjusted gross income, and to purchase health insurance if you have received unemployment compensation for twelve weeks or more.

Minimum distributions are required beginning at age 70-1/2. If you receive a distribution from a pension, 401(k), or other company retirement plan, you can roll the entire amount into an IRA and defer the taxes until withdrawal.

If you are not covered by an employer-sponsored retirement plan, you can deduct your entire contribution. If you are, it's still deductible if you're single with modified adjusted gross income (MAGI) of $55,000 or less or married with MAGI of $89,000 or less. Many non-working spouses can now deduct $5,000 in contributions even when their spouse is covered by a retirement plan.

Please consult a tax advisor to determine how federal, state, and local tax laws affect IRA deductibility for you and whether a Traditional or Roth IRA is best for your situation.

Roth IRAs

The Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. Named for former Senate Finance Committee Chairman William Roth, Jr., this IRA offers more incentives to boost your retirement savings, as well as more ways to use your nest egg.

The new Roth IRA offers tax-free growth when you hold it for at least five years and take distributions after you reach 59-1/2. Unlike traditional IRAs, you can keep your account intact beyond age 70-1/2 and can continue to make contributions. Being covered by a retirement plan doesn't affect your ability to contribute.

You can make tax penalty-free withdrawals for several reasons. You can pay first-time home-buying expenses ($10,000 lifetime limit) for you, your spouse, children, grandchildren, or parents. Penalty-free withdrawals are also allowed for death, disability, medical expenses that exceed 7.5% of your adjusted gross income, and to purchase health insurance if you have received unemployment compensation for twelve weeks or more.

You can contribute up to $5,000 a year or 100% of your earned income, whichever is less. If you are married, you can contribute up to $10,000 or 100% of your combined income, whichever is less, between each spouse's IRAs. Workers age 50 and older can play "catch-up" with their retirement savings by contributing up to $1000 a year over the maximum contribution limits.

If you're married with adjusted gross income (AGI) below $160,000, or single with AGI below $110,000, you can make annual contributions - up to $5,000 if Magi is $159,000 or $101,000 respectively. If your AGI is under $100,000, you can roll your existing IRAs, deductible and non-deductible, into a Roth IRA without penalty. However, if you do, you'll owe income tax on all previously untaxed contributions and earnings.

Please consult a tax advisor to determine how federal, state, and local tax laws affect IRA deductibility for you and whether a Traditional or Roth IRA is best for your situation.

Which IRA Is For You - Traditional or Roth?

Deciding which type is best and whether to transfer your current accounts to a Roth IRA is a complicated decision. You must consider your current and future tax brackets, other assets available, your age, your planned retirement age, and whether you built your current IRAs with deductible or non-deductible contributions. You also need to consider any other retirement investments you have. You can have both types of IRAs, but combined contributions can't exceed $4,000 a year. Your tax advisor can help you weigh these and other factors to make the best decision.

In general, a Traditional IRA may be better if you don't participate in an employee-sponsored retirement plan, expect to be in a lower tax bracket at retirement, and need the tax deduction. A Roth IRA may be better if you expect to be in the same or a higher tax bracket at retirement and you're starting at age 18 to 44. Because there is no mandatory distribution age, a Roth may also be better if you won't need your IRA for living expenses and want to leave sizable assets to your heirs.

When converting a Traditional IRA to a Roth, a good rule of thumb is to consider it if you can afford to pay the taxes from other savings or current earnings, or if you won't need the IRA funds during retirement and want to pass fund to your heirs. You generally should not convert if you are within five years of retirement or will need to dip into the IRA to pay the taxes.

Safety & Security

All Dakotaland Deposit Accounts are federally insured up to $250,000 by the National Credit Union Administration (NCUA), a U.S. Government Agency. IRAs are insured for an additional $250,000 per member.

Open Your Individual Retirement Account Today

Opening an Individual Retirement Account is easy. Stop into any of our DFCU locations, or call one of our Member Service Representatives at (605) 352-2845 or (800) 440-6573.