Individual Retirement Accounts at Baylake Bank

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Traditional IRA or Roth IRA
Eligibility and Contribution Limits
Taxes on the Earnings?
Withdrawals

Many workers today have unrealistic expectations about how much income they will need to maintain a comfortable lifestyle in retirement. Your retirement, like any other time in your life, may be marketed by financial ups and downs. A well-thought-out strategy, including an individual retirement account (IRA) can help you stay on a path toward a comfortable retirement.

Individual Retirement Account Calculators

These calculators are provided for reference purposes only and made available to you as self-help tools for your independent use. We can not and do not guarantee their accuracy or their applicability to your circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Taxable vs. Tax Advantaged Investments - Helps compare a normal taxable investment to two common tax advantaged situations: An investment where taxes are deferred until withdrawals are made, and an investment where taxes are paid on money that goes into the account, but all withdrawals are tax free.

Roth 401(k) or Traditional 401(k)
- Help determine the better option for your retirement between the Roth 401(k) or Traditional 401(k).

Traditional IRA or Roth IRA

What's the Difference? Tax Deductions or Tax-Free Earnings?

Traditional IRA - The traditional IRA is an account which allows you to defer taxes on your earnings until they are withdrawn. Also, certain contributions are tax deductible in the year they are made.
Roth IRA - The Roth IRA is a nondeductible account that 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, people, who expect to be in a higher tax bracket when they retire may benefit more from these accounts than from a traditional IRA.

Eligibility and Contribution Limits

Traditional IRA --Almost anyone under the age of 70 1/2 and with an earned income is eligible to establish a traditional Individual Retirement Account (IRA). A Traditional IRA can be established in addition to any type of government plan, tax-sheltered annuity, simplified employee pension plan, or a qualified plan provided by an employer. In addition, many employer sponsored plans offer limited investment options, but a traditional IRA can provide greater flexibility and hold almost any investment.

Roth IRA-- If you are one of many who expect to be in the same or a higher tax bracket in retirement, paying taxes now on a Roth IRA may save you money over the long run. Roth IRA contributions are nondeductible and taxed in the year they are earned.

It is in your best interest to seek the guidance of a tax or legal professional before contributing to a Roth IRA since the IRS has income restrictions.

Tax Year Contribution Limit Contribution Limit
- Age 50 and over

2012 $5,000 $6,000

2013 $5,500 $6,500

*Consult your tax advisor.

Do I Pay Taxes on the Earnings?

Traditional IRA - All earnings on your traditional IRA contributions (deductible and/or nondeductible) remain tax deferred until you make withdrawals from the account. They are then taxed as income in the year they are withdrawn.

Roth IRA - No taxes are paid on the earnings provided you withdraw the earnings as part of a qualified distribution. That's the best part of the Roth IRA. When you're ready to take a withdrawal, you pay no taxes on any of the earnings that your money has generated.

Talk with a Personal Banker near you for more information about Individual Retirement Accounts.

Withdrawals

When Can I Withdraw Funds without Incurring any IRS Penalties?

• First-time home purchase
• Medical expenses - with exceptions
• Health Insurance premiums - if unemployed
• Higher education expenses
• Qualified reservist
• Qualified HSA funding distribution
• Customer has reached age 59 ½
• Death
• IRS tax levy

Traditional IRA - Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income and may be subject to an additional 10 percent federal income tax penalty if taken prior to reaching age 59½ or for one of the 9 reasons listed above.

Roth IRA - Unlike a traditional IRA or an employer sponsored retirement plan, a Roth IRA is not subject to annual required minimum distributions after age 70½. As long as Roth IRA withdrawals take place after age 59½ or for one of the 9 reasons listed above, and the account has been open for at least five years, distributions will be free of federal tax and penalties.

When Must I Withdraw Funds?

Traditional IRA - When you reach your age 70½ year, you must begin to take minimum required withdrawals or severe penalties will be imposed.

Roth IRA - There are no required distributions from a Roth IRA.

Talk with a Personal Banker near you for more information about IRA withdrawals.