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IRAs (individual retirement accounts) are accounts into which you make contributions toward your future financial security. The amount you put into your IRA is flexible, so you may contribute whenever and in whatever amounts you so desire. IRAs are valuable financial tools for two reasons: they offer both tax-deductible contributions and tax-deferred earnings.

IRA contributions are based upon earned income. Although contribution amounts are limited, both working and non-working individuals may benefit from an IRA. Fully tax-deductible IRA contributions are contingent upon whether you and/or your spouse are covered by a pension plan at work. If neither of you is covered, you both qualify; if one of you is covered, the other will qualify. If, on the other hand, you are both covered by an employment-based pension plan, you may still be eligible for IRA contribution deductions based on your adjusted gross income (AGI).

Your money may be withdrawn from an IRA at any time; however, when a withdrawal is made, all monies are considered ordinary income and subject to taxation. Early withdrawals, those made prior to age 59½, will be assessed with a 10 percent early withdrawal penalty by the IRS with the exception of the following:

  • Payments made to a beneficiary
  • Monies withdrawn while you are disabled
  • Withdrawals made to you in equal, periodic payments by fixed annuitization
  • Withdrawals for deductible medical expenses
  • Withdrawals made for qualified first-time home purchases
  • Withdrawals made for qualified higher education expenses

SNPJ members may open an IRA for as little as $25. Non-members may open an IRA with a minimum initial contribution of $2,000. Contributions to your SNPJ IRA may be made on an annual, semiannual, quarterly, or monthly schedule and can be done on an even more regular basis. Contributions for an individual tax year may be made up to April 15 of the following year or until your tax filing deadline, extensions excluded.

Tax yearUnder Age 50Age 50+

For additional information on IRAs, consult IRS publication 575 – Pensions and Annuity Income. Remember, tax laws change and your personal situation is unique; therefore, you are advised to always seek appropriate advice from your attorney or tax advisor before pursuing any investment.

SNPJ does not assume responsibility for the accuracy of this information. Everyone’s information is different, so you should consult with your tax or legal advisor for your specific situation.