Individual retirement accounts (IRAs) are set up to use during retirement by offering significant tax advantage. The sooner you start saving, the more time you will have for your money to grow. We offer the most common types of IRAs, Traditional and Roth, depending on your age, income and financial goals.

We also offer a Coverdell Education Savings Account (ESA), a flexible, tax-advantaged way to save for your children’s education. This savings account offers more investment options than similar savings plans and can be used for K-12 qualified education expenses.

Saving at Carter Bank will help you gain peace of mind about your retirement and children’s education.

Benefits

  • Earnings grow federal income tax-deferred until withdrawn at or after the age of 59 ½ at which time they are taxed at your current federal income tax rate
  • Contributions and earnings can be withdrawn free of the 10% additional federal income tax at or after the age of 59 ½
  • Contributions may be tax deductible

Eligibility

  • Anyone under the age of 70 ½ who has earned income equal to or greater than their IRA contribution amount
  • Subject to exceptions, a required minimum distribution must be taken at the beginning of the year in which you turn 70 ½ years old

Benefits

  • Earnings are federal income tax free if withdrawn at or after the age of 59 ½ and the account has been open for five years or more
  • Contributions (not earnings) can be withdrawn tax free at any time*

Eligibility

  • Any age as long as your modified adjusted gross income for 2018 does not exceed $135,000 for single tax filers and $199,000 for joint tax filers
  • Traditional IRA may be converted to Roth IRA regardless of your modified adjusted gross income. Restrictions mentioned previously only apply to how much you can contribute a Roth IRA.

Withdrawals

  • No required minimum distribution ever

*There is a single, five-year holding period when determining whether earnings can be withdrawn federal, and in many cases state, income tax-free as part of a qualified distribution from a Roth IRA. This period begins January 1 of the year of the first contribution to any Roth IRA account. Unlike the Traditional IRA, contributions are not tax deductible.

In 2002, the Education IRA was renamed the Coverdell Education Savings Account (ESA) in memory of a champion of the Education IRA, U.S. Senator Paul Coverdell, who died of a cerebral hemorrhage in 2000 at the age of 61.

Benefits

  • Tax-deferred account with earnings and withdrawals free from federal income tax if used for qualified education expenses
  • Unlike 529 college saving plans, Coverdell ESA’s qualified education expenses include college and K-12 private school education*
  • Maximum yearly contribution per child is $2,000 until 18 years old with exceptions for special needs’ children**

Eligibility

  • Single tax filer with a modified adjusted gross income in 2018 less than $95,000 (partial contribution between $95,000 and $110,000)
  • Joint tax filer with a modified adjusted gross income in 2018 less than $190,000 (partial contribution between $190,000 and $220,000)
  • Contribution age limit is 18 and contribution must be used by the recipient of these funds by the age of 30***

Penalties for Non-qualified Withdrawals

  • Earnings subject to income tax
  • 10% IRS penalty on earnings with certain exceptions

Carter Tip: If you retire at 65, your retirement plan could easily be for three decades. Asking yourself the following questions may help you with the development of your plan:

  • Am I eligible for a pension or other benefits? If not, consider allocating assets to purchase annuities that can provide the opportunity for monthly income over your lifetime.
  • Should I continue to earn income by working part-time? A part-time job may help you delay drawing from your Social Security and savings.
  • Can I live on other sources besides Social Security? For every month you delay collecting Social Security after 62 years old, your benefit grows.

*Qualified education expenses include tuition, room and board, fees, books, equipment and supplies at an eligible K-12 and post-secondary school, along with computer equipment for K-12 (restrictions apply).

**A Special Needs ESA may continue to receive contributions after the intended recipient of these funds turns 18 years old.

***ESA can remain for the recipient of the ESA until this recipient turns 30. Any balance remaining in the ESA at the time the recipient becomes 30 years old must be distributed within 30 days.

The calculators on our website are provided for informational purposes only. Carter Bank & Trust and our affiliates disclaim any warranties, endorsement or representation, express or implied, related to these resources.

*For our current interest rates, please contact one of our convenient branch locations. Visit our locations page to find the branch closest to you.