First Choice Community Credit Union
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Traditional IRAs  

Image of an IRS 1040 form, cash, coins, a pen, and reading glasses laying beside a computer keyboard on a desk For most people, the money contributed to a traditional IRA is tax-deductible. How much is deductible depends primarily on your marital status and your employment situation.*  For example, for tax year 2008, the maximum tax-deductible contribution for an individual under the age of 70½ is the lesser of $5,000 or 100% of income derived from employment. (A married couple in which both spouses work may contribute up to $10,000 in total or 100% of earned income, if it is less, with $5,000 contributed to each account.) An individual may contribute more than this amount, but the excess contribution will not be tax deductible. In addition, dividends earned on your IRA funds are not taxed until distributions begin some time after age 59½. At that time, the money you withdraw is taxed, but only if it was originally a deductible contribution.

How to Open/Contribute to Traditional IRA

First Choice offers two IRA account options: share accounts and share certificates. A share account requires a minimum opening deposit of $50. Share certificates require a minimum $1,000 deposit and can be acquired in 6-month, 12-month, 18-month, 24-month and 36-month terms. All IRA contributions must be in the form of cash, according to IRS regulations. If you already have an IRA at another financial institution, you can have those funds re-deposited in an First Choice  IRA via a transfer or 60-day rollover.

By Federal regulation, you may make contributions for a particular tax year up until April 15 of the following year. For example, if you want to contribute to your IRA for 2006, your contribution must be postmarked by April 15 of 2007. When making a contribution, you should always indicate the year for which the contribution is made.


Generally speaking, penalty-free, though taxable, withdrawals/distributions from your traditional IRA may be taken at any time and for any reason after reaching age 59½. Other penalty-free distributions may be allowed prior to turning age 59½ under certain circumstances:

  • The individual is receiving a series of Substantially Equal Periodic payments as outlined in section 72(t) of the Internal Revenue Code.
  • The funds withdrawn are used to pay unreimbursed medical expenses in excess of 7.5% of your income.
  • The funds withdrawn are used for the first-time purchase of a home if the home is to be a principal residence. The limit is $10,000 over the home-buyer's life.
  • The funds withdrawn are used to pay qualifying health insurance premiums if the individual has been unemployed for at least twelve consecutive weeks.
  • The funds withdrawn are used to pay qualified Higher Education Expenses.
  • The IRA owner has a total and permanent disability (disability certification may be required).
  • The withdrawal is a result of the IRA owner's death.

According to federal regulations, mandatory minimum distributions from your IRA account must start at age 70½.

*Other factors may affect tax deductibility. Please consult a tax professional for more complete information.