Personal IRA Services

Individual Retirement Accounts (IRAs)

Individual Retirement Accounts are a great way for many Americans to start saving for their future. Southern Bank has a great selection of tax-deferred IRA investments to suit your needs. Select from:

Guide to Choosing An IRA

What exactly is an IRA?

IRAs are simply a set of rules governing the annual contributions, transfer and rollover activities, distributions and tax consequences.  Think of it as an umbrella set of rules—underneath the umbrella is the actual investment product.

Southern Bank offers IRA plans for individuals interested in building for their future security by investing in products that will help them realize their individual goals.  Individuals may be able to deduct contributions in whole or in part depending on individual circumstances.

The two main types of IRAs are:

Traditional IRAs

These investments have been popular with Americans for years and offer a wide range of investment vehicles.  These contributions may, or may not, be fully deductible, depending on the individual circumstances.  Deductibility depends on whether or not the individual or spouse is covered by a retirement plan at work, filing status, and personal income.  Even though an individual may not be able to fully deduct, they can still contribute up to the maximum allowable annual contribution or 100 percent of compensation, whichever is less.

Roth IRAs

This IRA became available to taxpayers January 1, 1998.  Roth IRA contributions are always made with after-tax dollars.  The earnings are TAX-FREE, as opposed to tax-deferred, when you retire pursuant to certain provisions. 

Note: You may contribute to both a Traditional IRA and a Roth IRA, but your total contribution is limited to the maximum annual contribution allowable by law.  See your Southern Bank Customer Service Representative for details.

Guide to IRA Rollovers

Monies or securities for rollover to an IRA include distributions made from your qualified retirement plan.  Qualified plans include 401(k) Plans, Profit Sharing Plans, Money Purchase Pension Plans, Keogh Plans, or 403(b) Plans.  A Rollover IRA is established when a distribution is made from a previous retirement plan.  It's very common for people who change employers to take their 401(k) balance and roll it over into an IRA.

A retirement plan distribution can be rolled into a Traditional IRA, combining it with your retirement assets.  However, you may want to consider a separate account designated as a "rollover IRA" if there's any possibility that you may want to move the assets back into another qualified retirement plan in the future.  Once the traditional and rollover funds are combined, the ability to return to another qualified retirement plan is limited.

If you plan on retiring soon, or on changing jobs, you may be about to receive a distribution from your present company's retirement plan.  Without careful planning, you could lose a significant part of your distribution to the government in taxes.  If you retire or change employers, you can take a lump sum distribution from your employer's retirement plan.  If you choose to take a distribution in hand, your employer is required to withhold 20% of your distribution in taxes.

You can avoid the 20% withholding simply by instructing your employer to roll over your distribution directly to an Individual Retirement Account.  If you are under the age of 59 ½, not only do you avoid 20% withholding by rolling over directly to an IRA, but as long as the distribution remains in your IRA, you also avoid a possible 10% penalty tax imposed on most early retirement plan distributions.

If you want to defer taxation on the distribution and still keep control of your investment options, it is important that you don't take receipt of the distribution in hand.  If you follow very specific rules, you can roll over the balance without a current tax liability to an IRA.

Some distributions do not qualify for a rollover.  For example, if you're over 70 ½, you cannot roll over your required minimum distribution into another Traditional IRA.  Roth IRAs do not have the age limitation.

Conversion from a Traditional IRA into a Roth IRA is allowed, provided that you have an annual gross income LESS than (not greater than) $100,000.  Since the contributions and conversions into a Roth IRA are always made with after-tax dollars, the tax liability from the conversion must be paid.  One option you have is to pay the taxes out of the conversion distribution.  Another option is to convert the entire distribution and pay the tax liability with other funds.  Conversion into Roth IRAs made for tax year 1999 and beyond require that taxes are due that year.

If rollover options are not used, an individual may have to pay additional taxes or penalties if they:

Clearly, there are a lot of rules, regulations, and red-tape.  That's why it is important to talk to your tax advisor.  He/she will help you throughout your decision-making process.

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