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Checking & Savings

Frequently Asked IRA Questions


Q: What is the Roth IRA?
A: The Roth IRA is an after-tax contribution which has a back ended benefit of growing tax-free. After-tax contribution means there is no immediate tax deduction benefit.


Q: Are there restrictions to open a Roth IRA?
A: You can open a Roth IRA if your modified adjusted gross income is less than $150,000 for married joint filers and $95,000 for single filers. For married joint filers, if your modified adjusted gross income is between $150,000 and $160,000, you can still take advantage of opening a Roth IRA, however, your contribution limits will be impacted. Single filers with a modified adjusted gross income between $95,000 and $110,000 will also have limits to the amount of contributions you can make.


Q: What is a qualified distribution from a Roth IRA?
A: A qualified distribution can be taken from a Roth penalty- and tax-free. To qualify the Roth IRA holder satisfies a 5 years waiting period which begins January 1 of the first taxable year in which you made the contribution and one of the following events occurs: attainment of age 59 ½, disability, the purchase of first time home, or death. In addition, contributions can be withdrawn tax-free and penalty-free at any time.


Q: What is the maximum amount I can contribute to a Traditional IRA or Roth IRA?
A: Individuals not achieving age 50 may contribute 100% of earned income up to $3000 up to the tax filing deadline for each year they have earned income. For those individuals age 50 and above, the contribution increases because of the "Catch up" contribution allowance. There is no age limit restriction on a Roth IRA.


Q: Can I convert my traditional IRA into a Roth IRA?
A: Yes. An IRA holder may roll over their Traditional IRA into a Roth IRA if your modified adjusted gross income, married or single, does not exceed $100,000. Call EFCU Financial Services at 812.424.2621 for more information.


Q: What is the deadline for making a contribution?
A: For both Traditional and Roth IRAs, you have until the tax filing without extensions. The sooner you make contributions, the sooner you could begin to shelter your earnings.


Q: Am I required to make contributions to my Roth IRA every year?
A: No. You are not required to make contributions to your Traditional or Roth IRA every year, nor are you required to make the maximum contribution in any year. Contribute as you wish, as long as you don't exceed the limits.


Q: How long can I make contributions to my Traditional IRA(s)?
A: You may make contributions for each year you receive wages, alimony or other compensation prior to the year you turn 70 ½.


Q: How long can I make contributions to my Roth IRA(s)?
A: You may make contributions for each year you receive wages, alimony or other compensation or you are the spouse of someone who is receiving one of those listed above.


Q: Can I open a Roth IRA at EFCU?
A: Yes. We offer a variety of options for you to choose. To open a Roth IRA Certificate or Accumulator Account, visit an EFCU branch or contact a Financial Advisor. They offer a variety of alternative options tailored to meet your needs.


Q: What is the Educational Savings Account?
A: The Educational Savings Account, also known as a Coverdell Education Savings Account, allows anyone to save tax-free for a child's K-12 and postsecondary education.


Q: Are there restrictions opening a Coverdell Educational Savings Account?
A: Yes. You can open an ESA account if your modified adjusted gross income is less than $190,000 for married joint filers and less than $95,000 for single filers. For married joint filers, if your modified adjusted gross income is between $190,000 - $220,000, you can still open an ESA account, however, your contribution limits will be impacted. Single filers with a modified adjusted gross income between $95,000 - $110,000 will also have limits to the amount of contributions you can make. The maximum contribution amount per child is $2000 per year. The child must be under 18 to receive the contribution to their account.


Q: What are the tax implications?
A: Money invested will grow tax-free. Non-qualified distributions are subject to tax on the growth portion and a 10% penalty.


Q: What if my child doesn't go to College?
A: An ESA account must be withdrawn by the time the beneficiary turns 30, unless the child is a "special needs child." Alternatively any funds remaining upon reaching age 30 must be either rolled over to a related qualified beneficiary or distributed to the beneficiary.


Q: Can I also make contributions to a traditional and/or Roth IRA?
A: Yes. The annual $2000 contribution will not affect your eligibility to put the full $3000/$3500 into a Traditional or Roth IRA.


Q: Are there other ways to save for my child's education?
A: An alternative way to save more for your child's education is with a 529 account. 529 Plan accounts do not have many of the restrictions that the ESA accounts have. They offer tax-free growth but are exclusively used to fund post secondary education expense. For more information, please contact MEMBERS Financial.



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