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Individual Retirement Accounts
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Individual Retirement Accounts
IRAs can be very complicated financial instruments. The
following information is intended to make you aware of
products The First National Bank of McHenry offers as part of
its Retirement Planning package. Specific advice in regards to
your personal situation should be directed to a competent tax
advisor who is aware of your entire financial portfolio.
Traditional IRA
It’s never too early to be thinking about retirement. With
a First National Bank of McHenry Traditional IRA, the
framework for a happy retirement can be laid out today. With
both the safety and security of the FDIC and the variety of
terms offered, retirement planning is convenient and simple
with The First National Bank of McHenry. Depending on you
income level and whether you are an active participant in
another retirement plan, your contribution may be fully or
partially tax deductible. Funds deposited into Traditional
IRAs accumulate until you are ready for distribution.
Appropriate income tax must then be paid on the amount
distributed.
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Roth IRA
The Roth IRA offers a remarkable benefit not allowed on any
retirement account before: totally tax-free growth. Unlike
traditional IRAs and other qualified retirement plans that are
only “tax deferred” (they grow tax free but you eventually pay
taxes on your accumulated earnings at retirement), the Roth
IRA is the first retirement account that is totally tax-free.
This means you never have to pay taxes on your growth, before
or after retirement. (As long as you are 59 ½ years old and
have held the account for at least 5 years. There is a 10%
penalty tax on withdrawals before 59 ½, unless an exception
applies.) As with all First National Bank of McHenry
investment products, funds held in your Roth IRA are FDIC
insured. Contributions to a Roth IRA are not tax deductible -
but are available to many people – including high income
individuals.
Coverdell Education Savings
Accounts
Also known as the Education IRA, the Coverdell Education
Savings Account was designed to set money aside for
educational purposes. Contributions, though not tax
deductible, are placed on deposit specifically as a gift to
the designated beneficiary generally under the age of 18.
Earnings on the deposit accumulate in a tax free environment
provided distribution is made for the purpose of higher
education expenses, which may also include qualifying
elementary and secondary school expenses. Your yearly per
beneficiary contribution amount is determined on your adjusted
gross income and your tax filing status.
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