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Bank of Sun Prairie offers separate IRA savings plans with varying maturities, interest rates and other features. You select the account or combination of accounts that best meet your needs. IRA investments are subject to substantial interest penalties for amounts withdrawn prior to maturity. More information is available upon request.

Traditional IRA - There is no minimum age for funding an IRA, but there is a maximum age.  The rules do not allow regular IRA contributions for the tax year in which an individual attains age 70 ½ or any year thereafter.  An individual must have compensation to make a regular contribution to an IRA.  The contribution limit is the lesser of the maximum allowable limit for the year or 100% of compensation.

For tax year 2003 contribution limit for taxpayers younger than age 50 during the year is $3,000.  The contribution limit for subsequent years, tax years 2003-2004 $3,000.  In years 2005-2007 the limit is $4,000 and in tax year 2008 the limit is $5,000.

Catch Up Provisions - An individual who attains age 50 before the close of a taxable year may make a “catch up” contribution for that taxable year.  The contributions allow older workers an opportunity to boost their account balances.  The allowable catch-up contribution amount increases the maximum allowable contribution limit for IRA owners age 50 or older.  For tax years 2003-2004 the total contribution for age 50 and over is ths standard contribution limit of is $3,000 plus the $500 catch-up contribution for a total of $3,500.  For tax year 2005 the standard contribution limit is $4,000,plus the $500 catch-up contribution for a total of $4,500.  For tax years 2006-2007 the $4,000 standard contribution limit plus the $1,000 catch-up contribution brings the total contribution to $5,000.  For tax year 2008, the standard limit is $5,000 and the total with $1,000 catch-up contribution is $6,000.

Spousal Contributions - Spousal contribution rules allow a married individual with little or no compensation to contribute to an IRA based on the married couple’s combined compensation.  They must file a joint federal income tax return and the amount of compensation earned by the individual making the spousal contribution must be less than that of his/her spouse.  An individual whose spouse is age 70 ½ or older and has compensation may make a spousal contribution to a traditional IRA as long as he/she is younger than age 70 ½.

One of the most attractive features of the traditional IRA is the ability to deduct a contribution on one’s federal income tax return.  Please check with your tax preparer as to whether you may be eligible to deduct your IRA contributions.

Roth IRA - This account does not have an age restriction, however, you must still have earned income.  Roth IRAs are nondeductible accounts that feature “tax free” withdrawals for certain distribution reasons after a five year holding period.   

There are many similarities between the Roth IRA and the traditional IRA.  For example, the Roth IRA has the same maximum annual contribution limits as the traditional IRA.   Other similarities include the deadline for contributing, the definition of compensation for purposes of determining eligibility and the distribution types that are exceptions to the 10% premature distribution penalty tax on early distributions.   

Roth IRA contributions are never tax deductible, while traditional IRA contributions may be tax deductible.  There are no required minimum distributions for a Roth IRA owner at age 70 1/2 , there is no age limit for contributors, regular contributions are available prior to age 59 ½ without a 10% penalty tax, and distributions of earnings are tax free when qualified. 

Coverdell Education Savings Account - This is a non tax-deductible account that features tax free withdrawals for a child’s qualified education expense.  “CESAs” are tax-favored savings accounts created to help save for an individual’s education expenses.  Distributions for qualified education expenses are federally tax-free and not subject to a 10% penalty tax.  

A CESA is established and funded by someone other than the person it is intended to benefit.  The rules do not require any specific familial relationship.  The child must be under age 18 and the contribution limit is $2,000 per child per year.  Contributors are not required to have compensation in order to contribute to a CESA, however, if  he/she has income, this may affect the contribution amount.  No contributions are permitted after a designated beneficiary’s 18^th birthday.   

IRAs offer significant advantages over other types of savings, but special rules do apply.  To be absolutely certain you get the maximum value it is best to speak with a trusted financial advisor.