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Understanding Traditional IRA Accounts



Individual Retirement Account (IRA)

An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. The account is created by a written document. The document must show that the account meets all of the following requirements.

  • The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian.
  • The trustee or custodian generally can’t accept contributions of more than the deductible amount for the year. However, rollover contributions and employer contributions to a SEP can be more than this amount.
  • Contributions, except for rollover contributions, must be in cash.  
  • You must have a nonforfeitable right to the amount at all times.
  • Money in your account can’t be used to buy a life insurance policy.
  • Assets in your account can’t be combined with other property, except in a common trust fund or common investment fund.
  • You must start receiving distributions by April 1 of the year following the year in which you reach age 72. 


What are some tax advantages of an IRA?

  • Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and based on your circumstances.
  • Generally, amounts in your IRA (including earnings and gains) aren’t taxed until distributed. In some cases, amounts aren’t taxed at all if distributed according to the rules.

A Traditional IRA is any IRA that isn’t a Roth IRA or a SIMPLE IRA. APCI FCU offers Traditional IRA shares and share certificates terms with no annual maintenance fees.


Who can open a Traditional IRA?

You can open and make contributions to a Traditional IRA if you (or, if you file a joint return, your spouse) received taxable compensation during the year. Generally, compensation is what you earn from working. Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments.

You can have a Traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.

If both you and your spouse have compensation, each of you can open an IRA. You can’t both participate in the same IRA. If you file a joint return, only one of you needs to have compensation.


APCI FCU can assist you with your retirement planning and offers solutions for your everyday banking needs. Please contact Al Kauffman, Certified IRA Professional, at 800-821-5104, ext. 2840 for more information.


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