IRAs
If you are in the market for a way to save money for retirement, Grand Valley Bank is here for you. We offer Individual Retirement Accounts (IRAs) that will help you reach your retirement goals. We provide both Traditional and Roth IRAs, as well as Coverdell Education Savings IRAs. Your IRA funds are invested in our Certificates of Deposits or Savings Account. Our CDs typically offer you higher interest than a savings account and give you more control over what happens next for those funds during your renewal period. You can choose terms anywhere from 3 to 60 months. If you are one our Grand Valley Bank Star or Senior checking account customers, you are eligible to receive an additional .25% interest rate on your CDs. Contact a New Accounts Representative today about making your retirement money work harder for you!
Traditional IRAs may be fully or partially deductible, depending on your income level and whether or not you are considered an “active” participant in an employer sponsored plan. Deductibility is available on a sliding scale basis if you are an “active” participant.
The traditional IRA is a convenient savings vehicle for retirement. If the contributions are deductible, the contributions and earnings will be taxable when withdrawn. If you begin withdrawals after age 59 ½, your tax rate will probably be lower. If you make withdrawals prior to age 59 ½ , you may be able to do so without penalty if:
- The withdrawal is for qualified higher education expenses (tuition, books, room and board, etc.) for yourself, your spouse, your children, or your grandchildren.
- Up to $10,000 withdrawn for a first time home purchase is possibly qualified. These withdrawals would be subject to ordinary income tax and may also be subject to early withdrawal penalties.
| Taxable Year | Single Phase Out Range With Work Plan | Joint Phase Out Range With Work Plan | Maximum Contribution | Over age 50 Catch-Up Contribution Allowed |
|---|---|---|---|---|
| 2019 | $63,000-$73,000 | $101,000-$121,000 | $5,500 | $1,000 |
| 2020 | $63,000-$73,000 | $101,000-$121,000 | $6,000 | $1,000 |
IRA contribution limits for 2020 are $6,000 and $7,000 for those age 50+ wishing to make catch-up contributions.
Contributions to the Roth IRA are not tax deductible, but the earnings grow tax free. An account must be designated as a Roth IRA when it is opened in order for you to receive its special benefits.
The Roth IRA is similar to the Traditional IRA in many ways, but the different tax treatment may make it a better choice for some taxpayers.
Like all IRAs, the Roth is subject to income limitations for the maximum contribution. Individuals and spouses with earned income are eligible to a Roth as long as your MAGI (Modified Adjusted Gross Income) meet the following limits:
| Taxable Year | Single Phase Out Range | Joint Phase Out Range | Maximum Contribution | Over age 50 Catch-Up Contribution Allowed |
|---|---|---|---|---|
| 2019 | $122,000 - $137,000 | $193,000 - $203,000 | $6,000 | $1,000 |
| 2020 | $124,000 - $139,000 | $196,000 - $206,000 | $6,000 | $1,000 |
| In general, you may begin to make withdrawals on the date you become 59 1/2. For the earnings to be withdrawn tax-free, the funds must have been in the account for at least 5 years. If you withdraw your funds prior to age 59 1/2, your original contributions, not your interest or earnings, may be withdrawn without tax penalty or income tax. | ||||
| You may withdraw qualified "Special Purpose" distributions (of contributions and earnings) before age 59 1/2 without tax penalty for qualified higher education expenses and for up to $10,000 towards a first time home purchase. There is no requirement that you begin taking distributions by age 70 1/2.. | ||||
IRA contribution limits remain at $5,500.00 in 2018 & 2019, and $6,500.00 for those age 50+ wishing to make catch-up contributions.
The purpose of a Coverdell Education Savings account is to provide you with a tax-advantaged way to save for educational purposes. Funds contributed are considered a gift to the designated beneficiary that is under the age of 18. This age limit may be waived for people qualifying as Special Needs beneficiaries. The funds in this account are required to be coordinated with other education plans such as State Tuition Plans or HOPE and Lifetime Learning tax credits
Eligibility - You can establish a Coverdell Education Account for designated beneficiaries and are eligible for the full contribution amount if you are a joint tax filer with an adjusted gross income (AGI) below $190,000, or if you are a single tax filer with and AGI below $95,000,.
Contribution Limits - Your maximum contribution amount for the tax year 2017 is $2000 per beneficiary per year. Generally the beneficiary will be a child. The maximum allowable contribution is based on AGI as discussed above. The contributions are not deducted from taxable income.
Withdrawals - The funds in the account are treated as a gift to your beneficiary and therefore, may only be withdrawn by the beneficiary for qualified higher education expenses. Any funds that are not used by your beneficiary may be rolled over into another Coverdell Education Account for another beneficiary. By the time your beneficiary turns 30 years old, all funds need to be withdrawn. This age limit may be waived for those qualifying as Special Needs beneficiaries. Any funds not used by the beneficiary for qualified education expenses and not rolled into another Coverdell Education Account will be distributed to the beneficiary and subject to normal income taxes and a 10% penalty.
Eligibility for Other IRAs - Contributions that are made to one or more Coverdell Education Account do not exclude you from making an individual contribution up to the maximum allowed for Traditional or Roth IRAs for retirement savings if you are qualified.