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NMLS ID: 644618

©2004 Northwest United Federal Credit Union
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Individual Retirement Accounts (IRA)**

The Individual Retirement Account (IRA) was created to allow wage-earners an investment plan for retirement, while deferring income taxes. Regardless of income or participation in other pension plans, taxes on IRA earnings are deferred until the money is withdrawn. IRAs are available for retirement and educational savings. Anyone with $3,000 of earned income can contribute up to $3,000 a year to an IRA. Spousal contribution up to $3,000 per year is also allowed. (Special restrictions apply, consult a tax advisor for more information).

Northwest United offers Traditional IRAs, Roth Conversion and Educational IRA Accounts. The member may choose to invest in either IRA Share Accounts or IRA Certificate Accounts. Consult our member service department for more details regarding IRA accounts. IRA Share Certificates can be opened with as little as $500. Members may transfer IRAs from other institutions to Northwest United upon maturity by calling our member service department at least 15 days prior to the maturity date.

Catch-up Contributions

For taxable years beginning in 2004, individuals who have reached age 50 by the end of the year are able to make additional catch-up contributions of $500 per year to their Traditional or Roth IRA. For taxable years beginning in 2006, the additional catch-up amount increases to $1,000.*

Traditional IRA

Funds can be withdrawn without an IRS penalty if used for higher education purposes or first-time home purchases. Income limits for deductibility are being raised over the next several years, making more people eligible for fully deductible contributions. Deductibility for contributions for one spouse no longer depends on whether or not the other spouse is covered by a pension plan.

The annual contribution limit increases to $3,000 in 2004, $4,000 in 2005 and $5,000 in 2008. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments. The annual limit applies to any combination of IRA plans other than ESA. Contributions are fully taxable if you are not an active participant in an employer retirement plan. Otherwise, phase out rules apply. Investments grow on a tax deferred basis. Earnings are taxed only upon withdrawal.* Limits on the adjusted gross income.

Roth IRA

This IRA was named after Senate Finance Committee Chairman William Roth. In a Roth IRA as long as you earn income, you can establish and contribute to a Roth IRA even after age 70 _. While the contributions won't be deductible on federal income tax return, there is a potentially greater tax benefit. Money left in the Roth IRA for at least five years and withdrawn after age 59 1/2 will not be taxed, no matter what tax bracket or income level.

By converting your IRA to a Roth IRA, you can enjoy tax-free withdrawals. However, the amount you convert is subject to income tax and penalty.*

Coverdell Education Savings Account

A Coverdell Education Savings Account (ESA), formerly Education IRA, is a great way for parents, grandparents and others to help meet the rising costs of a student's education.* Funds may be withdrawn, tax free, for higher education purposes. Deposits must be made before the student turns 18 and disbursed by age 30. For taxable years beginning in 2002, the annual contribution amount has been increased from $500 per beneficiary to $2,000 per beneficiary. While there is no tax deduction for amounts contributed to an ESA, earnings grow tax-free. And your ESA can be used to pay qualified elementary school and secondary school expenses as well as those for higher education.*

Check Current Rates

Contact Member Services at 303 424 5037 ext 104 or ext 105 to learn more about today's IRA and ESA.


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