Traditional IRAs
A Traditional IRA offers a tax deferral for qualified contributors. In other words, if you make $30,000 and you contribute $1,000 a year to your Traditional IRA, you would only be taxed by the government on $29,000. Taxes are then paid on earnings when you withdraw the money once you reach retirement age.
You can invest in a Traditional IRA if you are under the age of 70 1/2 and have income from some sort of earned compensation, or if you are filing federal taxes jointly with a spouse who has income from compensation. You can also roll money from a qualified compensation plan—such as a 401(k)—into a Traditional IRA upon retirement.
While your tax advisor can offer more guidance on which type of IRA best suits your needs, we can answer your questions and assist with opening your IRA Account. Simply stop by any Bronco office or call us at 757.569.6000.
Currently, you can contribute up to $5,000 annually (for owners age 50 and older, you may be able to contribute up to $6,000), but contributions cannot exceed compensation. Contribution regulations change annually, so be sure to check with your tax advisor when opening an IRA. Contributions may be tax deductible and earnings will grow tax-deferred until withdrawn.
Contributions may be made by:
- Single individuals not active in employer retirement plans, such as a 401(K)
- Single individuals active in qualified retirement plans with income below Modified Adjusted Gross Income (MAGI) limits—see below to understand your MAGI and how to calculate your it
- Married couples with neither spouse active in an employer retirement plan
- Married individuals active in qualified retirement plans filing joint tax returns with income below MAGI-defined limits
- Married individuals not active in qualified retirement plans filing joint tax returns with spouses who are, as long as MAGI is below defined limits
Your MAGI is calculated as follows:
- Start with your Adjusted Gross Income (line 22, Form 1040A, or line 38, Form 1040).
- Add back in your IRA deduction amount (line 17 on Form 1040A or line 32 on Form 1040)
- Add back in your student loan interest (line 18 on Form 1040A or line 33 on Form 1040)
- Add back in any tuition and fees deductions from line 34 on Form 1040 (or line 19 on Form 1040A)
- Add any domestic production activities from line 35 on Form 1040 (there is no line for this on 1040A)
- Add back any foreign earned income exclusions from line 18 of Form 2555EZ or line 45 of Form 2555
- Add back any foreign housing deduction from line 50 of Form 2555
- Add back any excluded qualified savings bond interest shown on line 3, Schedule 1, Form 1040A, or line 3, Schedule B, Form 1040 (from line 14, Form 8815)
- Add back in any excluded employer-provided adoption benefits shown on line 30, Form 8839.
The total of these nine items listed above make up your Modified Adjusted Gross Income, or MAGI.
One additional benefit of a Traditional IRA is there are circumstances when you can withdraw funds from your with out being penalized. Those conditions include withdrawing money for:
- Qualified higher-education expenses
- Disability of the account holder
- Payment to beneficiaries upon the account holder’s death
- Unreimbursed medical expenses that exceed 7.5% of account holder’s adjusted gross income (from the previous tax year)
- Payment of medical insurance premiums if account holder is unemployed for 12 weeks or longer
- Expenses associated with buying or building a first home
- Payment of any IRS levy
You can also elect to start withdrawing from your Traditional IRA without penalty once you reach the age of 59 1/2
Not a member yet? Give us a call today at 757.569.6000.
Roth IRAs
Unlike a Traditional IRA, a Roth IRA does not offer the possibility of a tax deduction up front. However, earnings on a Roth IRA may be completely tax-free at the time of withdrawal (provided certain qualifications are met).
You can invest in a Roth IRA if you earn compensation (like a paycheck) and your Modified Adjusted Gross Income (MAGI) is less than defined limits set by Congress. Your MAGI is calculated as follows:
- Start with your Adjusted Gross Income (line 22, Form 1040A, or line 38, Form 1040).
- Add back in your IRA deduction amount (line 17 on Form 1040A or line 32 on Form 1040)
- Add back in your student loan interest (line 18 on Form 1040A or line 33 on Form 1040)
- Add back in any tuition and fees deductions from line 34 on Form 1040 (or line 19 on Form 1040A)
- Add any domestic production activities from line 35 on Form 1040 (there is no line for this on 1040A)
- Add back any foreign earned income exclusions from line 18 of Form 2555EZ or line 45 of Form 2555
- Add back any foreign housing deduction from line 50 of Form 2555
- Add back any excluded qualified savings bond interest shown on line 3, Schedule 1, Form 1040A, or line 3, Schedule B, Form 1040 (from line 14, Form 8815)
- Add back in any excluded employer-provided adoption benefits shown on line 30, Form 8839.
The total of these nine items listed above make up your Modified Adjusted Gross Income, or MAGI.
Currently, you can contribute up to $5,000 annually (for owners age 50 and older, you may be able to contribute up to $6,000), but contributions cannot exceed compensation. Contribution regulations change annually, so be sure to check with your tax advisor when opening an IRA.
Regular contributions can be withdrawn tax-free and penalty-free from a Roth IRA at any time. Earnings are tax-deferred and withdrawals are tax-free if the account is open for five years and withdrawals are for a qualified reason (age 59 1/2, disability, death, or a first-time home purchase). Unlike a Traditional IRA, you are not required to start withdrawals at age 70 1/2.
While your tax advisor can offer more guidance on which type of IRA best suits your needs, we can answer your questions and assist with opening your IRA account. Simply stop by any Bronco office or call us at 757.569.6000.
Not a member yet? Give us a call today at 757.569.6000.
Health Savings Account(HSA)
A Health Savings Account is a tax-free way for you to pay for current, future and retirement health expenses. However, to qualify for an HSA, you must be enrolled in a High Deductible Health Plan (HDHP) and you must not be covered by any other health insurance plan (excluding automobile, specific-injury, dental, vision, disability or long-term care insurance).
You cannot open an HSA once you enroll in Medicare, but if you had an HSA prior to enrolling, you can continue to pay for medical expenses from the account, tax-free. You cannot continue to make contributions to your HSA, however. In addition, you may not contribute to an HSA if you can be claimed as a dependent on someone else’s tax return.
A Health Savings Account provides you with a number of great benefits, including:
- Flexibility—You can use the funds in your account to pay for current medical expenses, including expenses that your High Deductible Health Plan may not cover. Or you can save the money in your account for future medical expenses.
- Savings—You can grow your HSA through investments, like an Individual Retirement Account.
- Control—You make all the decisions about your account as far as how much money you put in, when you make contributions, and which investments to fund.
- Portability—You keep your HSA even if you change jobs, change your medical coverage, become unemployed, move to another state or change your marital status.
- Ownership—Unlike some medical “cafeteria” plans, your HSA funds remain in your account from year to year. There are no “use it or lose it” conditions.
- Triple Tax Savings—1. You can take a tax deduction for the amount contributed to your account, 2. You earn tax-free interest through investments, and 3. Any withdrawals are tax-free when used for qualified medical expenses.
For a list of Frequently Asked Questions about HSAs, visit the U.S. Department of Treasury website.
When you’re ready to open your Health Savings Account, simply stop by any Bronco office or call us at 757.569.6000.
Coverdell Education Savings Account (ESA)
Formally known as Education IRAs, a Coverdell ESA is an account created as an incentive to help parents and students save for education expenses, including elementary, middle and high school, as well as vocational, college and graduate-level courses. Qualified expenses may include:
- Tuition, room and board
- Computers and laptops (even if not required by the school)
- Books and supplies
- Tutoring
- Transportation
Certain restrictions apply. Visit the Internal Revenue Service’s website for details.
Contributions to the account are not tax deductible, but amounts deposited grow tax free until distributed. Total contributions in “after tax dollars” for the beneficiary of a Coverdell ESA cannot be more than $2,000 in any year, no matter how many accounts have been established (accounts for the same beneficiary may be established by more than one person). There are also contribution limits for taxpayers based on the contributor’s Modified Adjusted Gross Income (MAGI).
Coverdell ESA funds can be invested in stocks, bonds, certificates or mutual funds; however, they cannot be used to directly own real estate, precious metals, collectibles or partnerships in private businesses.
Your MAGI is calculated as follows:
- Start with your Adjusted Gross Income (line 22, Form 1040A, or line 38, Form 1040).
- Add back in your IRA deduction amount (line 17 on Form 1040A or line 32 on Form 1040)
- Add back in your student loan interest (line 18 on Form 1040A or line 33 on Form 1040)
- Add back in any tuition and fees deductions from line 34 on Form 1040 (or line 19 on Form 1040A)
- Add any domestic production activities from line 35 on Form 1040 (there is no line for this on 1040A)
- Add back any foreign earned income exclusions from line 18 of Form 2555EZ or line 45 of Form 2555
- Add back any foreign housing deduction from line 50 of Form 2555
- Add back any excluded qualified savings bond interest shown on line 3, Schedule 1, Form 1040A, or line 3, Schedule B, Form 1040 (from line 14, Form 8815)
- Add back in any excluded employer-provided adoption benefits shown on line 30, Form 8839.
The account can be “owned” by the person establishing it or the beneficiary. The beneficiary of a Coverdell ESA is someone who is under the age of 18 or is a special needs beneficiary. Any adult can establish a Coverdell ESA for any child under the age of 18, even if the designated beneficiary is not related to the person establishing the account. If the money in the Coverdell ESA is not used by the time the beneficiary turns 30, it must be distributed to the beneficiary within 30 days. The portion representing earnings on the account will be taxable and subject to an additional 10% tax that can be avoided by rolling over the full balance to a Coverdell ESA for another family member.
Note: “Ownership” of the Coverdell ESA can also affect the amount of money a student may get when applying for financial aid. If the child is both the owner and the designated beneficiary, and is still considered a dependent of the parents, none of the assets are counted against financial aid. If the child is both the owner and the designated beneficiary and is considered independent of the parents, 20% of the assets are counted against financial aid. If the owner is a parent, then 5.64% of the assets are counted against financial aid. If the owner is a grandparent, member of extended family, or unrelated individual, the assets do not count against financial aid at all.
If you’re looking for a beneficial way to save for your child’s or grandchild’s education, we can answer your questions and assist with opening your Coverdell Education Savings Account. Simply stop by any Bronco office or call us at 757.569.6000.
Not a member yet? Give us a call today at 757.569.6000.
Christmas Club
If you want extra cash for your holiday shopping and entertainment expenses, our Christmas Club makes it easy for you to save a little throughout the year to provide you with the cash you need when the time comes.
A Bronco Christmas Club Account offers:
- Payroll deduction capability for automatic savings
- Dividends that are paid at the same rate as regular share accounts
Don’t wait for the last moment to do your holiday shopping. Start your Christmas Club Account now by visiting any Bronco office.
Not a member yet? Give us a call today at 757.569.6000.
MatriMoney
Call us sentimental, but we love weddings. We get a thrill out of seeing our members start a new life together and we take pride in knowing that we can provide assistance, now and through each new phase along the way, to make that journey a little easier.
For starters, they can visit our Couples & Money Anytime Advisor for tips on preparing for their financial life together. Couples completing the Advisor quiz receive a special wedding gift from Bronco. In addition, couples that are MatriMoney Account holders will receive major closing cost discounts on new or refinanced Bronco mortgages.
What’s a MatriMoney Account? MatriMoney is a special interest-bearing account that friends and families can contribute to instead of buying bridal shower, bachelor party or even wedding gifts.
A Bronco MatriMoney Account offers:
- A minimum opening deposit of just $100
- No fees and no registration charges
- Registry announcements—wallet-size cards that explain the program to anyone who might like to contribute
- The ability for Guests to make their gift deposit at any Bronco office or by mail
- “Congratulations” cards so that Guests can send their own personal messages to the bride and groom.
Ready to tie the knot? Stop by any Bronco office to register for MatriMoney.
Not a member yet? Give us a call today at 757.569.6000.
