Individual Retirement Accounts (IRAs)

Individual Retirement Accounts (IRAs)

The most effective retirement plan is one you actively engage in. That, and great tax benefits. Esquire Bank makes it easy to lay the foundation for a secure future. We offer traditional and Roth IRAs, and a wide range of CDs to invest within your IRA.

Traditional IRA
  • No annual fee or setup charges
  • Anyone under age 70½ can open
  • Interest earnings are tax-deferred
  • Contributions can generally be deducted on current tax returns*
  • $5,000 contribution limit per year
  • Additional $1,000 "catch-up" contribution allowed for ages 50+
  • Funds can be used to purchase CDs within the IRA
  • Withdrawals can begin at age 59½
  • Early withdrawals subject to penalty**
  • Mandatory withdrawals at age 70½
  • $500 minimum deposit to open
  • FDIC insured

*Consult with a tax advisor about this and other aspects of IRAs.

**Certain exceptions apply, such as healthcare, purchasing first home, etc.

Roth IRA
  • No annual fee or setup charges
  • Income must be less than $95,000 annually to open*
  • Earnings and principal are 100% tax free upon withdrawal
  • Contributions are not tax deductible
  • $5,000 contribution limit per year
  • Additional $1,000 "catch-up" contribution allowed for ages 50+
  • Funds can be used to purchase CDs within the IRA
  • Principal can be withdrawn penalty-free at any time**
  • Interest can be withdrawn penalty-free at age 59½
  • Early interest withdrawals subject to penalty***
  • No mandatory distribution age
  • $500 minimum deposit to open
  • FDIC insured

*Or $150,000 for married couples. Consult with a tax advisor about this and other aspects of IRAs.

**Subject to some minimal conditions.

***Certain exceptions apply, such as healthcare, purchasing first home, etc.

Choose an IRA

Both traditional and Roth IRAs offer unique tax advantages. But depending on your circumstances, one may be better than the other for you. To help make the most informed decisions, the biggest differences between the two are outlined below.

  • For starters, you cannot open a Roth IRA if your income is more than $95,000 a year ($150,000 for married couples).
  • Contributions to traditional IRAs are generally tax deductible, whereas they are not with a Roth IRA. Thus, a traditional IRA will provide some immediate tax benefits.
  • Earnings are tax free with a Roth IRA, whereas they are only tax deferred with a traditional IRA, meaning they will be taxed as income. The clear benefit here lies with a Roth IRA, especially if you expect to continue working past retirement age. However, if you do plan on retiring, the tax-deferred characteristic of a traditional IRA is not at as disadvantageous, since you will be in a lower income tax bracket.
  • Principal contributions can be withdrawn penalty-free with a Roth IRA; not true with a traditional IRA. This creates greater flexibility in case funds are needed. Although, since IRAs are most effective when compound interest builds on the balances over time, withdrawals are not recommended.
  • Mandatory withdrawals begin at age 70½ with traditional IRAs; there is no mandatory withdrawal age for Roth IRAs. Thus, a Roth IRA can typically be stretched out longer and/or provide an estate.

NOTE: This summary is provided for general informational purposes. Please consult with a tax advisor about your own personal situation.

You might also like...