Retirement

IRA Savings Account

This is an interest bearing account that allows your money to compound and grow for future investments or cash at retirement. Deposits for the current year are accepted at any time. Deposits for the prior year will only be accepted until April 15th of the current year. Rollovers and transfers are also eligible for deposits.

*All Federal Regulations regarding Individual Retirement Accounts apply.

Features:

$100 minimum to open with auto transfer from Farmers National Bank account or other financial institution account
  • Weekly, Biweekly, or Monthly
  • $25 minimum per transfer
$500 minimum to open without automatic transfer

Distributions can be taken any time
  • Account balance cannot fall below $100
  • IRS penalties may apply for early withdrawal
Variable interest rate compounds quarterly

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Traditional and Roth IRAs

If you haven’t given much thought to IRAs in recent years, think about this: now IRAs mean a lot more than just saving for retirement. They mean unprecedented tax-free options, more flexibility in making withdrawals and more freedom to deduct your contributions. That means you can get to what you’re saving for faster, easier and smarter than you could before.

The Roth IRA is a nondeductible IRA that offers tax-deferred earnings and tax-free distributions. Tax-deferred earnings allow you to grow your nest egg at a faster pace than taxable investments. But, the best part about these new investment products is that they offer tax-free distributions if you follow certain requirements. That means the money you withdraw is yours alone and doesn’t have to be included as income at tax time. Contributions to a Traditional IRA may be tax deductible and the earnings are tax-deferred until distribution.

Traditional and Roth IRA Comparison Chart

Item Traditional IRA Roth IRA
Who is eligible to contribute? An individual who is under age 70 ½ during the entire year and has taxable compensation (or is married filing jointly and his or her spouse has taxable compensation.) An individual who has taxable compensation (or is married filing jointly and his or her spouse has taxable compensation) and whose modified adjusted gross income (MAGI) for 2013 is below $127,000, if single, ($188,000 if married filing jointly) or below $129,000 if single ($191,000 if married filing jointly) for 2014.
How much may be contributed? Individuals under age 50 may contribute 100% of taxable compensation up to $5,500 for 2013 and 2014. Individuals age 50 or older may contribute 100% of taxable compensation up to $6,500 for 2013 and 2014. Same as Traditional IRA, except that an individual’s Roth IRA contribution limit is phased out based on the individual’s MAGI and tax-filing status.
What is the contribution deadline? The individual’s federal income tax-filing deadline, not including extensions (e.g., April 15). Same as Traditional IRA
Are contributions tax deductible? Fully federal income tax deductible if the individual (and spouse, if married) is not an active participant in an employer-maintained retirement plan. Otherwise, deduction is based on the individual’s MAGI and tax-filing status. Never federal income tax deductible.
Are distributions taxable? Generally fully taxable, except the portion that represents basis (after-tax funds), if any. Generally tax-free, except the earnings portion of a nonqualified distribution.
Are distributions subject to IRS 10% early distribution penalty? The taxable portion is subject to the IRS 10% early distribution penalty, unless the individual is age 59 ½ or older, or an exception applies. Same as Traditional IRA, except conversion funds that are distributed within five years are also subject to the IRA 10% early distribution penalty, unless the individual is age 59 ½ or older, or an exception to the penalty applies.
When must distributions begin? Must begin by April 1 of the year following the owner’s age 70 ½ year. Not required during the owner’s lifetime.

Contribution Limit Chart

  2011 2012 2013 2014*
Under Age 50 $5,000 $5,000 $5,500 $5,500
TIRA Age 50 – 70 ½ $6,000 $6,000 $6,500 $6,500
RIRA Age 50 or Older $6,000 $6,000 $6,500 $6,500
*Cost of living adjustments (COLA) made in $500 increments apply to the $5,500 contribution limit, but only if the inflation adjustment results in at least a $500 increase. The extra $1,000 contribution limit available to individuals age 50+ is not adjusted for inflation.

Deducting Traditional IRA Contributions

Tax-Filing Status and Participation Status Year Full Deduction if MAGI is at or below Partial Deduction if MAGI is: No Deduction if MAGI is at or above
Single, Active Participant* 2013 2014 $59,000 $60,000 $59,000 – $69,000 $60,000 – $70,000 $69,000 $70,000
Married Filing Jointly, Active Participant 2013 2014 $95,000 $96,000 $95,000 – $115,000 $96,000 – $116,000 $115,000 $116,000
Married Filing Jointly, Not Active Participant, but Spouse Is 2013 2014 $178,000 $181,000 $178,000 – $188,000 $181,000 – $191,000 $188,000 $191,000
Married Filing Separately, He or Spouse Active Participant 2013 2014 $0 $0 $0 – $10,000 $0 – $10,000 $10,000 $10,000
*This category also includes a head of household. NOTE: Cost-of-living adjustments (COLAs) apply to the Traditional IRA deductibility income limits. The indexed amounts are rounded to the nearest multiple of $1,000.

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FDIC Insurance

Background

The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance coverage for depository institutions such as banks and savings and loan associations. The deposit insurance is used to protect deposits in the event that the financial institution fails and does not have adequate funds to pay off what it owes to its depositors. The FDIC is an independent agency of the U.S. Government and FDIC-insured deposits are backed by the full faith and credit of the United States.

Beginning in 2011, the coverage limit for all federally insured deposits will be increase for inflation every five years.

Insurance for IRAs Increased to $250,000

The FDIC insurance limit on certain retirement accounts (including IRAs) at insured banks, savings institutions and credit unions was increased from $100,000 to $250,000, effective April 1, 2006. The higher insurance coverage applies to IRAs (Traditional, Roth and SIMPLE IRAs).

Also included are self-directed Keoghs, 457 plan accounts for state and local government employees and employer sponsored defined contribution plans such as 401(k)s that are self-directed. Generally, self-directed means that the employee can choose which insured institution maintains his or her retirement fund deposit.

Starting April 1, 2006, all of an individual’s deposits at the same insured institution that are in the same brand category of retirement accounts are added together and the total is insured up to $250,000.

IRAs Insured Separately from Non-Retirement Funds

Retirement accounts are insured separately from other deposits (such as a checking account) at the same institution because an IRA is held in a different right or capacity (i.e., trust or custodial account). Congress temporarily increased FDIC insurance for other deposit accounts from $100,000 to $250,000 through December 31, 2013.

What if I Need Access to My Money Now?

A helpful feature of the Roth IRA is that, for non-qualified distributions, original contribution amounts are returned first. Contributions (as opposed to earnings) are not subject to taxation or the 10 percent IRS premature distribution penalty when distributed. In other words, you can always get back your principal tax free and IRS penalty free for any reason.

When is the Contribution Deadline for Funding a Roth IRA?

Roth IRAs for the taxable year can be opened and funded anytime in between January 1 and the date your tax return is due for the year, excluding extensions. This is normally April 15 of the following year.

How Do I Open a Roth IRA?

Simply see one of our representatives. We will explain the nature of these accounts in more detail and help you complete the simple forms necessary to establish your Roth IRA.

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MAGI Limit for Roth IRA Contributions

Cost-of-living adjustments will apply to the MAGI limits for making regular or spousal Roth IRA contributions. [IR-2013-86]

Tax Filing Status Full Contribution if MAGI is Limited Contribution if MAGI is No Contribution if MAGI is
Single 2013
2014
$112,000
$114,000
$112,000 – $127,000
$114,000 – $129,000
$127,000
$129,000
Married, filing Jointly 2013 2014 $178,000
$181,000
$178,000 – $188,000
$181,000 – $191,000
$188,000
$191,000
Married, filing Separately 2013/2014 $0 or less $0 – $10,000 $10,000 or more