Personal Individual Retirement Account (IRA) Plans

What’s the difference between a Traditional IRA and a Roth IRA?

Traditional IRA

This type of Individual Retirement Account allows you to defer taxes on the earnings on your contributions until they are withdrawn. Also, certain contributions are tax deductible in the tax year for which you make them. You are eligible to establish a Traditional IRA if you are younger than age 70 1/2 for the entire tax year and you or your spouse have compensation.

Roth IRA

The Roth IRA allows only nondeductible contributions and features tax-free withdrawals for certain distribution reasons after a five-year holding period. Since Roth IRA contributions are nondeductible and taxed in the year they are earned, if you expect to be in a higher tax bracket when you retire, you may benefit more from a Roth IRA than a traditional IRA. You are eligible to establish a Roth IRA if you or your spouse have compensation and your modified adjusted gross income (MAGI) does not exceed certain prescribed limits.

Wisconsin Governor James Doyle signed the 2009 Act 161 aligning the State of Wisconsin with current Federal Laws regarding Roth IRA conversions on March 15, 2010. Many who were not eligible for Roth conversions can now convert a traditional IRA to a Roth IRA, without early distribution or excess distribution penalties. Wisconsin River Bank does offer Roth IRAs utilizing a Certificate of Deposit for your investment choice. Call us to review your term and rate options. Learn more about Roth IRA’s.

Health Savings Account (HSA)

A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse, and your dependents. You are eligible for a regular HSA contribution if, with respect to any month, you:

  • Are covered under a high-deductible health plan (HDHP) on the first day of such month;
  • Are not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing preventative care and limited types of permitted insurance and permitted coverage);
  • Are not enrolled in Medicare; and
  • Cannot be claimed as a dependent on another individual’s tax return.

If you are eligible, you can establish an HSA in much the same way you would establish an IRA, with a qualified trustee or custodian. Each year, you are responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with nontaxable HSA distributions.

Because IRA’s grow tax deferred, in most cases, if you have to cash them in early, there are penalties that you should be aware of. Learn more about 10% Withholding vs. 10% “Penalty” on IRA Distributions.

Wisconsin River Bank offers a wide array of Individual Retirement Accounts (IRAs) options. To assist you with your IRA investment bank options, and questions, please call a Wisconsin River Bank Personal Banker: Sauk City (608.643.6300) or Lodi (608.592.7788).

Note: Wisconsin River Bank is not engaged in rendering tax, investment or legal advice. If tax, investment or legal advice is required, please seek the services of your qualified professional advisor.