Banner Federal Credit Union

What Is an IRA?
An IRA (Individual Retirement Account) is a special savings plan authorized by the federal government to help you accumulate retirement or education funds. IRA accounts offer special tax-saving incentives for qualified individuals (consult your tax adviser regarding your specific situation). The IRA accounts at Banner Federal Credit Union are federally insured separately from other savings accounts up to $150,000 by the NCUA. IRA accounts typically earn higher rates of return than regular share savings accounts.

Traditional IRA
A traditional IRA is a type of retirement plan started in 1975 offering tax-deferred earnings and the possibility for tax-deductible contributions. Anyone under age 70 ½ who has income from compensation (including spouse's earnings if filing jointly) can contribute up to $5,000 per year for (2005 to 2007 tax years) or 100% of compensation, whichever is less. Plus a bonus of $1000 can be contributed for individuals over fifty years of age.

Your traditional IRA contribution may be tax deductible. You should consult your tax advisor for the income ranges and interpretations of tax regulations.

FAQ's Traditional IRAs

Who Can Contribute?	Anyone under age 70½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
How Much Can I Contribute?	$4,000 for 2007 and $5,000 for 2008 and, 2009 $1,000 limit for participants 50 or older Cannot exceed compensation Reduced by contributions to Roth IRAs
Who Can Make Deductible Contributions?	Fully-deductible contributions: Single individuals not active in employer retirement plans (regardless of income) Single individuals active in employer retirement plans with MAGI* of $52,000 Married couples with neither spouse active in an employer retirement plan (regardless of income) Married individuals active in employer retirement plans with joint tax returns showing MAGI* of $103,000*** or less Married individuals not active in employer retirement plans with spouses who are, as long as MAGI* is $156,000*** or less Individuals with incomes exceeding the above limits may be able to deduct an amount that is less than the amount that can be contributed
What Are The Tax Advantages?	Earnings grow tax-deferred until withdrawn Contributions may be tax-deductible
When Can I Withdraw Without Restrictions?	Withdraw penalty-free for any of the following reasons: Qualified higher-education expenses First-time home purchase** Age 59½ Disability Qualifying medical expenses exceeding 7.5% of adjusted gross income Payment to beneficiaries upon the owner's death Payment of health insurance premiums while unemployed for 12 weeks or longer

* MAGI - modified adjusted gross income from the federal tax form
** Lifetime limit for exemption on first-time home purchase is $10,000
***For tax year 2007. See your tax advisor for details.

Roth IRA
The Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. The money in your Roth IRA, including earnings, can be withdrawn tax-free if you conform to the plan provisions. However, unlike traditional IRAs, your contributions to a Roth IRA are never tax-deductible.

You can contribute the full $4,000 in 2007 to a Roth IRA if you are a single filer with at least $4,000 of compensation and a modified adjusted gross income (MAGI) up to $101,000. A couple filing a joint federal income tax return with at least $8,000 of compensation and a MAGI up to $159,000 can contribute $4,000 for each spouse. Partial contributions can be made on MAGI up to $116,000 for single filers and $169,000 for joint filers. When income exceeds $116,000 for single filers and $160,000 for joint filers, a regular Roth contribution cannot be made for that year. You can contribute to both a Roth IRA and a traditional IRA up to the maximum combined limit of $3,000 per year per spouse.

Earnings can be withdrawn tax-free and penalty-free after the account has been open five tax years for the following reasons: you have reached the age of 59½, disability, death or a first-time home purchase.

Unlike a traditional IRA, you can contribute to a Roth IRA even after age 70½ if you continue to earn compensation. You also are not required to take minimum distributions when you reach age 70½. Minimum distributions must be made to your beneficiaries, however, upon your death.

FAQ's Roth IRAs

Who Can Contribute?	Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI*: Up to $101,000 (single filers) Up to $159,000 (joint filers) Reduced contributions for higher incomes (up to $116,000 for single filers and $169,000 for joint filers)
How Much Can I Contribute?	$3,000 for 2007 and $4,000 in 2008 through 2009 Catch-UP 50 years old and over: $1,000 Cannot exceed compensation Reduced by contributions to Traditional IRAs
Who Can Make Deductible Contributions?	No one can deduct contributions
What Are The Tax Advantages?	Regular contributions can be withdrawn tax- and penalty-free at any time After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons: age 59½, disability, death, or a first-time home purchase**
When Can I Withdraw Without Restrictions?	Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59½, disability, death, or a first-time home purchase**) Not required to begin withdrawals at age 70½.

* MAGI - modified adjusted gross income from the federal tax form
** Lifetime limit for exemption on first-time home purchase is $10,000

Education IRA
The Education IRA is a tax-advantaged savings account created by the Taxpayer Relief Act of 1997 which is to be used to pay your child's higher-education expenses, such as tuition, fees, books, supplies, equipment, and in some cases, room and board. Scholarships or grants are deducted from the allowable expenses for the Education IRA. Your contributions to an Education IRA are never tax-deductible, however, withdrawals are tax-free earnings when used for qualified higher-education expenses.

Contributions of up to $2,000 per year per child can be made to an Education IRA if you are eligible: a single filer with modified adjusted gross income (MAGI) up to $110,000; joint filer with MAGI between $190,000 and $220,000. If your income exceeds these limits, you cannot make regular contributions to an Education IRA.

Contributions can be made to an Education IRA until the child reaches the age of 18. You can withdraw funds from the account at any time; however to avoid tax consequences from the withdrawal, you must use the funds to pay for qualified higher-education expenses for your child before he or she reaches age 30. If your child, the designated beneficiary of the IRA, does not use all funds before the age of 30, the unused funds can be rolled over into the Education IRA of another child in your family who is under the age of 30.

FAQ's Education IRAs (Coverdell Education Savings Account)

Who Can Contribute?	Anyone who has a MAGI* Single filer: less than $110,000 Married filing joint: less than $220,000 Some people with higher MAGI may be able to make smaller contributions Contributions not allowed after the beneficiary reaches age 18 (except for 2007 and later years contributions after age 18 allowed for special needs beneficiaries)
How Much Can I Contribute?	$2,000 per child for 2007 and later years Limit applies to all Education IRAs (also known as the Coverdell Education Savings Account) for the same child
Who Can Make Deductible Contributions?	No one can deduct contributions
What Are The Tax Advantages?	Withdrawals for certain qualified education expenses are tax-free Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age For 2007 and later years, qualified education expenses may include tuition, fees, books, computer equipment, and technology required for elementary, secondary, and post-secondary education For 2007 and later years, a beneficiary may receive tax-free distributions from an Education IRA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits
When Can I Withdraw Without Restrictions?	Withdrawals are tax and penalty-free only for qualified education expenses (earnings are subject to tax and penalty for most other withdrawals) Funds can be transferred from one child's account to another account for another child in the family

* MAGI - modified adjusted gross income from the federal tax form
** Lifetime limit for exemption on first-time home purchase is $10,000

What Different between Traditional and Roth IRAs
The difference between the Traditional Roth IRA accounts can be significant and you should be aware of the differences before investing in these long-term savings funds. The Traditional IRA use pre-tax contributions to fund the account, thus deferring payment of income taxes on the contribution and the earnings that accumulate. The contributions are typically tax deductible.** Early withdrawal penalties apply on any funds withdrawn prior to reaching the age of 59½. Traditional IRA withdrawals and earnings are taxed at the time of withdrawal.

The Roth IRAs use after tax contributions, which can be withdrawn any time without penalty. When the account has been open five tax years, earnings can be withdrawn tax and penalty-free for any of these reasons: age 59½, disability, death, or a first-time home purchase. The contributions are not tax deductible.

If you have questions about IRA accounts or would like to open an account, please contact our nearest credit union branch.

** See you tax advisor for details