Retirement. When do you start planning for it? How much will you need to retire comfortably? How much do you need to invest now? How do you make it happen?
As the song goes, "quickly go the years." That's why at American Bank of New Jersey we think the best time to start saving for retirement is as soon as you can. American Bank can help you get started in the road to a secure financial future with an Individual Retirement Account (IRA). For your convenience, we offer two types of Individual Retirement Accounts: the Traditional IRA and the Roth IRA. You can invest in any type of CD or savings account as an IRA or choose our special 18 month fixed or variable rate CDs.
Whether you're in your early working years, peak earning years or staring retirement in the face years, it pays to have a Traditional IRA, in more ways than you can imagine. Apart from a great way to save for your future, you can benefit right now. You may be allowed to deduct your contributions on your federal income tax return, depending on your adjusted gross income and participation in an employer-sponsored retirement plan. Talk to one of our retirement specialists to find out if you qualify. Another way it pays right away is that all of your IRA earnings are completely free from federal income tax until you withdraw them from your account. That's important because tax-deferred money grows quicker. If withdrawn, dividends, interest and capital gains are taxed as ordinary income. You can make withdrawals penalty free after age 59 ½.
The federal government is now allowing higher contribution to Traditional IRAs, highlighted in the chart below:
| Under Age 50 | Age 50-70 ½ | |
| 2006 | $4,000 | $5,000 |
| 2007 | $4,000 | $5,000 |
| 2008 | $5,000 | $6,000 |
After 2008, the contribution limit will raise in increments of $500 depending on inflation. Of course, these are limits. By opening a Traditional IRA you are not required to make contributions every year. What is required is that you may not contribute more than the annual IRA contribution limit or 100% of your earned income for the year, whichever is less.
If you do decide to withdraw money from your Traditional IRA before 59 ½ you may but subject to the possibility of an IRS 10% penalty. Under certain circumstances withdrawals will be allowed. Consult with one of our experts to find out what is and what is not allowed.
For greater flexibility, a Roth IRA may be the right IRA for you. The Roth IRA is designed for those who do not qualify for the Traditional IRA annual tax deduction but still want tax-free earnings growth. With the Roth IRA, contributions are not tax deductible, although if the funds are distributed in "qualified distribution" they are not subject to federal income tax. This makes the earnings basically "tax free." Like the Traditional IRA, the government has increased contribution limits (see chart below).
| Roth IRA Under Age 50 |
Roth IRA Age 50+ ½ |
|
| 2006 | $4,000 | $5,000 |
| 2007 | $4,000 | $5,000 |
| 2008 | $5,000 | $6,000 |
You may withdraw earnings tax-free and without penalties after 5 years and 59 years of age. There is also no maximum age to make a contribution. You may contribute past age 70 One huge advantage to a Roth IRA is that you may take a "qualified distribution" and incur no federal income tax and no 10% early distribution penalty.
A withdrawal is a "qualified distribution" if it is paid:
Please consult with your accountant before making any withdrawals.
Both Traditional & Roth IRAs are federally insured. To find out how you can open an IRA and start planning for a financially secure retirement, please visit any of our branches and ask to speak with one of our retirement specialists.
An Education Savings Account (ESA) can be a valuable tool for saving for a child's education. These flexible accounts can be used in many ways. Whether you want to save for college, pay tuition at a private high school, or provide for an after-school reading tutor, an ESA could help you provide for your child's education.
An ESA offers two important tax advantages:
With these benefits, it's easy to see why contributing to an ESA for a child is a good way to help save for the child's education expenses.
