Individual Retirement Accounts (IRAs)- Many Americans postpone or neglect saving for retirement believing Social Security benefits will be sufficient as a primary source of income. In most cases, this is not true. IRAs offer you tax-advantaged ways to make building your retirement easy.

FCFCU offers you several IRA plans and each gives you a number of federally-insured investment options. They include:

Individual Retirement Plans

• Traditional IRA
• Roth IRA
• IRA Rates

Traditional IRAs- Contributions to Traditional IRAs (under certain circumstances) and the earnings on them aren't 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 $4,000 for taxable year 2007 and $5000 for taxable years 2008 through 2010 or 100% of your earned income, whichever is less. If you are married, you can contribute up to $8,000 for taxable year 2007 & $10,000 for taxable years 2008 through 2010 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 $1,000 over the maximum contribution limit for taxable years 2007 through 2010. You can make contributions up to April 15 for the prior tax year.

You can make tax penalty-free withdrawals for several reasons and 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 covered by an employer sponsered plan the contributions may be deductible if you're single with modified adjusted gross income of $50,000 or less or married with MAGI of $80,000 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.

At FCFCU, federally-insured Traditional IRAs are available as Certificate or Savings IRAs.

Roth IRAs- The 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 $4000.00 for taxable year 2007 and $5000.00 for taxable years 2008 through 2010 or 100% of your earned income, whichever is less.  If you are married, you can contribute up to $8000.00 for taxable year 2007 and $10,000.00 for taxable years 2008 through 2010 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 $1000.00 over the maximum contribution limit for taxable years 2007 through 2010.

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.

At FCFCU, federally-insured IRAs are available as Certificate or Savings IRAs. IRA's are federally insured up to $250,000.

For more information about any of FCFCU products and/or services, visit a local branch or call our Information Center at 703/218-9900 during our hours of operation.

Rates may change after the account is opened and are subject to change weekly. Funds earn dividends from day of deposit to day of withdrawal, compounded daily and paid monthly. Accrued dividends are forfeited if account is closed prior to monthly dividend posting. Fees or other conditions may reduce earnings on this account. Refer to FCFCU's Truth-In-Savings Disclosure and Account Agreementsand Schedule of Fees and Service Charges.

Following the Rules: Withdrawing From Your IRA

If you don't plan ahead on how and when you should access your IRA (individual retirement account) money, you may get a worse tax bite than necessary.

The rules that govern minimum required distributions from IRAs are among the most complicated in our tax code. This article can only give a brief overview so its best to consult with an IRA specialist before making a distribution decision.

Required minimum distributions
If you own a traditional IRA, you must start taking a minimum amount of money out of your IRA by April 1 the year following the year in which you reach age 71 1/2 This is called your required beginning date. --your required beginning date. You always can take out more, but not less than the required minimum distribution amount. The required minimum distribution amount is based on a calculation of your accounts value at year end and your life expectancy--how many more years you are expected to live. The longer your life expectancy, the lower the annual required distribution.

If you do not take at least the minimum required withdrawal amount each year, you'll owe a 50% penalty on the amount that should have been withdrawn.

Roth IRA owners are not required to take minimum distributions during the owners lifetime. Roth owners can let their IRA grow free of federal taxes longer and take the money out on your own timetable.

Tax consequences of a withdrawal
Dipping into your IRA, of course, means you'll also get stuck with an income tax bill. Traditional IRA funds are taxed upon withdrawal. At that time, the owner must add the amount of the withdrawal to his or her income taxes for the year of the withdrawal.

For example, if your taxable income is $30,000 and you withdraw $5,000 from your traditional IRA, then you will pay taxes on $35,000 for that year. Owners who make nondeductible contributions do not pay taxes on that portion of their traditional IRA withdrawals.

Because Roth IRA contributions are not tax deductible, they are not taxed when withdrawn. Roth IRA earnings are taxable if the withdrawal is not a qualified distribution. Contributions to a Roth IRA are withdrawn first, so no taxes are owed until the owner dips into their earnings.

Its the IRA owners responsibility to determine the taxable portion of each withdrawal, with assistance from a professional tax adviser.