Online Banking
Individual Retirement Accounts (IRA)
Save for your future now with an IRA account from Bank of New Orleans. BNO offers both the Traditional IRA and the new Roth IRA. In addition to these two plans, BNO also offers our customers the opportunity to open a Coverdell Education Savings Account. Below is an overview of each of these plans.
Traditional IRA
A Traditional IRA is an Individual Retirement Account other than a Roth IRA, Simple IRA, or Coverdell Education Savings Account. It is a tax deferred savings plan authorized by the federal government to encourage you to accumulate money for retirement.
Traditional IRA Q & A:
Q: Who may contribute to a Traditional IRA?
A: Any individual who has been under the age of 70½ years for the duration of the tax year and who has earned compensation or received alimony.
Q: When may I contribute to a Traditional IRA?
A: Qualified individuals can open or fund a Traditional IRA at any time. You have from January 1st of a calendar year until that year’s tax filing deadline (typically April 15th of the following calendar year) to make a contribution for that tax year. Contributions made after the previous year’s tax filing deadline are attributed to the current tax year.
Q: What are the contribution limits for Traditional IRAs?
A: Qualified Traditional IRA owners are permitted to contribute $5,000 in the tax year 2011 and 2012. Additional catch-up contributions of $1,000 can be made by qualified individuals over 50.
Qualified participants are permitted to annually contribute the following maximum amounts or 100% of your earned compensation and alimony; whichever is less:
| Tax Year | Maximum Contribution Limit Under Age 50 | Maximum Contribution Limit Over Age 50 |
|---|---|---|
| 2011 | $5,000 | $6,000 |
| 2012 | $5,000 | $6,000 |
Q: May I contribute the full amount to a Traditional IRA?
A: If you are covered by a retirement plan at work, then your contribution to a Traditional IRA is reduced if:
| Partial contribution if your MAGI* is between: | ||
|---|---|---|
| Single Person Filing Individually | For tax year 2011 For tax year 2012 |
$56,000 - $66,000 $58,000 - $68,000 |
| Married Couple Filing Jointly | For tax year 2011 For tax year 2012 |
$90,000 - $110,000 |
| Married Person Filing Separately | For tax year 2011 & 2012 | $0 - $10,000 |
*Modified Adjusted Gross Income
Q: Is my Traditional IRA contribution tax deductible?
A: If you and your spouse are not covered by an employer sponsored retirement plan, you will receive a full deduction regardless of your income. Participation by you or your spouse in an employer sponsored retirement plan will affect your ability to deduct your Traditional IRA contribution. Contact BNO for further information.
Q: Are distributions from a Traditional IRA tax free?
A: Distributions attributable to deductible contributions and earnings will generally be taxed as income in the tax year they are withdrawn. If you have made non-deductible contributions, you will not have to pay tax on that portion.
Q: When can I take distribution from a Traditional IRA?
A: You can withdraw funds from your IRA any time after you reach age 59½. Distributions taken prior to age 59½ are subject to a 10% early withdrawal penalty unless the distribution is:
- made to a beneficiary due to an account holder’s death.
- made to an account holder who has become permanently and totally disabled.
- made as part of a series of “substantially equal” periodic payments.
- taken to pay for qualifying medical expenses or health insurance for unemployed individuals
- taken to pay first time home purchase expenses or higher education expenses of qualified individuals
Q: When must I take distribution from a Traditional IRA?
A: As a Traditional IRA owner, you are required to begin taking minimum distributions from your accounts at age 70½. Your RMDs must be distributed to you by December 31st of each year after that. You may choose to delay your first RMD until April 1st of the calendar year following the year in which you attain age 70½. However, if you choose to wait, you will also be required to take another distribution by December 31st of that same year to satisfy that year’s RMD requirement.
Taking your RMD is very important. Failure to take your full distribution will result in a 50% IRS penalty tax.
Roth IRA
A Roth IRA is an Individual Retirement Account to which participants are able to make annual non-deductible contributions. Unlike a Traditional IRA in which your earnings are tax deferred, Roth IRA earnings can be tax free.
Roth IRA Q & A:
Q: Who may contribute to a Roth IRA?
A: Single filers who have earned compensation or have received alimony totaling less than $122,000 for 2011 and
$125,000 for 2012 may contribute, regardless of age.
Married individuals filing jointly who have earned compensation or have received alimony totaling less than $179,000 for 2011 and $183,000 for 2012 may contribute regardless of age.
Q: When may I contribute to a Roth IRA?
A: Qualified individuals can open or fund a Roth IRA any time. You have from January 1st of a calendar year until that year’s tax filing deadline (typically April 15th of the following calendar year) to make a contribution for that tax year. Contributions made after the previous year’s tax filing deadline are attributed to the current tax year.
Q: What are the contribution limits for Roth IRAs?
A: Qualified Roth IRA owners are permitted to contribute $5,000 in the tax year 2011 & 2012. Additional catch-up contributions of $1,000 can be made by qualified individuals who are over age 50.
Qualified participants are permitted to annually contribute the following maximum amounts or 100% of your earned compensation and alimony; whichever is less:
| Tax Year | Maximum Contribution Limit Under Age 50 | Maximum Contribution Limit Over Age 50 |
|---|---|---|
| 2011 | $5,000 | $6,000 |
| 2012 | $5,000 | $6,000 |
Roth IRA owners may also make contributions to a Traditional IRA. However, it is important to note that your combined Roth and Traditional IRA contributions may not exceed the maximum contribution limit in a given tax year.
Q: May I contribute the full amount to Roth IRA?
A: Your income and filing status will determine the amount you may contribute to a Roth IRA.
| Full contribution if your MAGI* is less than: | Partial contribution if your MAGI* is between: | ||
|---|---|---|---|
| Single person Filing Individually |
For tax year 2011 |
$107,000 $111,000 |
$107,000 - $122,000 $110,000 - $125,000 |
| Married Couple Filing Jointly |
For tax year 2011 For tax year 2012 |
$169,000 $173,000 |
$169,000 - $179,000 $173,000 - $183,000 |
| Married Person Filing Separately |
For tax year 2011 & 2012 |
N/A | $0 - $10,000 |
*Modified Adjusted Gross Income
Spousal IRA rules enable married couples filing jointly to contribute the maximum amount to their separate IRA accounts even if one spouse has little or no earned income. To qualify, their combined earned income must be equal to or greater than the total combined amount.
Q: Is my Roth IRA contribution tax deductible?
A: Contributions to Roth IRA are not tax deductible.
Q: Are distributions from a Roth IRA tax free?
A: “Qualified Roth IRA distributions” may be withdrawn tax and penalty free. “Non–qualified” distributions may be taxable and subject to an IRS 10% early distribution penalty.
Q: When can I take a distribution from a Roth IRA?
A: You may withdraw your contributions from your Roth IRA at any time, tax and penalty free. “Qualified distributions” of your earnings may also be taken tax and penalty free. Please refer to the table below for an explanation of the requirements of “qualified distributions.”
| Qualified Roth IRA Distributions | ||
|---|---|---|
| In order to be a "qualified distribution" the following characteristics MUST apply: You have been a participant in the Roth IRA for over five years, beginning with the first year in which the account was converted or a contribution was made AND . . .
|
The 10% IRS early withdrawal penalty will not apply to “non-qualified” distributions to which one or more of the following exceptions apply:
|
|
Q: When must I take a distribution from a Roth IRA?
A: Roth IRA owners are never required to take a distribution from their accounts at any age.
Coverdell ESA
Coverdell Education Savings Accounts are an ideal way for you to begin saving money to help a child, grandchild, or any young person you know pay for higher education expenses down the road. Contributions to a Coverdell Education Savings Account are not tax-deductible, but distributions used to pay for the qualified educations costs of the named beneficiary are generally tax free.
Coverdell ESA Q & A:
Q: Who may contribute to a Coverdell ESA?
A: Single filers who have earned compensation or have received alimony totaling less than $110,000 may contribute, regardless of age.
Married individuals filing jointly who have earned compensation or have received alimony totaling less than $220,000 may contribute, regardless of age.
Q: When may I contribute to a Coverdell ESA?
A: Qualified individuals can open or fund a Coverdell ESA any time. You have from January 1st of a calendar year until that year’s tax filing deadline (typically April 15th of the following calendar year) to make a contribution for that tax year. Contributions made after the previous year’s tax filing deadline are attributed to the current tax year.
Q: What are the contribution limits for a Coverdell ESA?
A: The contribution limit for qualified individuals is $2,000 annually per beneficiary below the age of 18.
Please note: Beneficiaries are limited to receiving a total of $2,000 in contributions to one or more Coverdell ESAs annually, regardless of the contributor’s limits.
Q: May I contribute the full amount to a Coverdell ESA?
A: Your income and filing status will determine the amount you may contribute to each beneficiary of a Coverdell ESA.
| Full contribution if your MAGI* is less than: | Partial contribution if your MAGI* is between: | |
|---|---|---|
| Single person Filing Individually | $95,000 | $95,000 - $110,000 |
| Married Couple Filing Jointly | $190,000 | $190,000 - $220,000 |
*Modified Adjusted Gross Income
Contributions to a Coverdell Education Savings Account are separate from contributions made to a Traditional or Roth IRA and therefore may be made in addition to your contribution limits for those types of accounts.
Corporations and other entities, including tax-exempt organizations, are permitted to make contributions to Coverdell Education Savings Accounts regardless of the income of the corporation or entity in the year of the contribution.
Q: Is my Coverdell ESA contribution tax deductible?
A: Contributions are not tax deductible.
Q: Are distributions from a Coverdell ESA tax free?
A: Distributions from a Coverdell Education Savings Account which are used to pay for the “qualified education expenses” of the beneficiary are tax free. Any amount of the distribution in excess of the qualified expenses, which is not attributable to contributions, will be taxed as earned income.
Q: When can I take distribution from a Coverdell ESA?
A: The beneficiary may take distributions from their Coverdell ESA at any time to pay for the “qualified education expenses.” Qualifying expenses include:
Expenses incurred in connection with the enrollment or attendance of the beneficiary at a public, private, or religious school providing elementary or secondary education. These expenses include tuition, fees, academic tutoring, special needs services, books, supplies, or other equipment. Also included are expenses associated with room and board, uniforms, transportation and supplementary items and services such as extended day programs. Computer technology, equipment, and Internet access and related services may also be paid tax-free from the account, if these items are to be used by the beneficiary or their family during the beneficiary’s period of schooling.
Post-secondary room and board expenses. (Only if the beneficiary is enrolled on at least a half-time basis at an eligible institution.)
If the beneficiary does not use the earnings for qualified education expenses, the funds may be rolled over to certain qualified family members of the beneficiary.
Q: When must I take distribution from a Coverdell ESA?
A: The funds from a Coverdell Education Savings Account must be received within 30 days after the beneficiary reaches age 30 unless the beneficiary is a special needs beneficiary. The funds must also be distributed within 30 days of the death of the beneficiary.
If the funds have not been distributed or rolled over by that time, the earnings will be taxable and subject to a 10% IRS penalty tax. The distribution rules do not apply in the event that the beneficiary qualifies as a special needs beneficiary.
|
Please be aware that there are a number of scams involving phone calls and/or email. BNO will never make an unsolicited request for your personal information over the phone or via email. Click here for more information on security and fraud protection. |