Investments! Sometimes the word sends shivers up your spine.
Portfolio. What's that?
If CD, IRA and ROTH sound like alphabet soup - give us a call.
The customer service representatives at First National Bank talk your language. They'll help spell out your investment options in a way you'll understand what's best. You'll rest comfortably knowing that the choice you make is an informed decision.
Choose from any of the following options to learn more about what First National Bank can do for your investment portfolio:
Certificates of Deposit (CDs)
What is the advantage of a First National Bank Certificate of Deposit? Flexibility.
Do you like to invest short term? A First National Bank Certificate of Deposit is designed to suit your financial needs and objectives. Want to put some money into a CD for the long haul? We have great rates that let you get the most out of your money.
Interest can be deposited directly to your checking or savings account. We'll either send you a check or add the interest back into the amount of your CD... whatever your choice may be. The interest earned can be paid monthly, quarterly or semi-annually - the decision is up to you.
Contact us or give us a call for the latest rates.
Traditional IRAs *
One of the most popular means of saving for retirement is an Individual Retirement Account or IRA. These accounts allow you to defer taxes on deposited earnings until they are withdrawn. Some contributions are tax deductible in the tax year for which they are made.
Requirements: If you are under the age of 70 1/2 for the entire tax year and have earned income (or your spouse has earned income), you are eligible to establish a traditional IRA. Our IRAs are offered at the First National Bank Certificate of Deposit terms with a fixed interest rate, or you may choose the 18-month Variable Rate IRA and add funds during the term.
Note: The IRS will impose a 10 percent premature distribution penalty on certain withdrawals made before you reach the age of 59-1/2.
* Consult with your tax advisor for specific tax benefits or penalties.
Frequently Asked Questions:
How much can I contribute?
In one year, you may contribute any amount up to 100 percent of your compensation or $4,000 whichever is less. Remember that $4,000 is the aggregate amount you can contribute to any IRA accounts in a given year.
Do I get a tax deduction for my contributions?
Deductibility of your contribution is based on whether or not you are an active participant in an employer-maintained retirement plan. If you are single and not an active participant, you are eligible for a full ($4,000) deduction no matter how large your income. If you, or your spouse, are active participants the deductible amount is dependant on your modified adjusted gross income and income tax filing status. Even if you are not eligible for a deductible contribution, you can still make non-deductible contributions and take advantage of the tax deferred earnings.
Do I pay taxes on my earnings?
All earnings on your traditional IRA contributions (deductible or non-deductible) remain tax deferred until you make withdrawals from the account. They are then taxed as income in the year they are withdrawn.
When can I withdraw funds without incurring any IRS penalties?
You can withdraw funds from your traditional IRA without incurring a 10% IRS pre-mature distribution penalty any time after you reach age 59-1/2.
How to avoid the penalty before 59-1/2:
- you become disabled,
- if the distributions are part of substantially equal periodic payment,
- for medical expenses in the excess of 7.5 of your adjusted gross income,
- for health care insurance if you've been receiving unemployment compensation for at least 12 weeks,
- for qualified higher education expenses,
- for a first time home purchase.
How are funds taxed at distribution?
If you are over the age of 59-1/2, simply include the taxable portion of the amount withdrawn (generally, deductible contributions and all earnings) as income. However, if you are under age 59-1/2 and do not meet one of the exceptions, you must also pay a 10% IRS penalty for premature distribution. The nondeductible portion of the distribution is not taxable when withdrawn nor is it subject to the 10% penalty.
When must I withdraw funds?
When you reach 70-1/2 year of age, you must begin to take minimum required withdrawals or severe penalties will be imposed.
Why don't I just open both a Roth and a Traditional IRA?
You can and you should if possible! Opening both a traditional IRA and a ROTH IRA lets you develop your own blend of tax-deductible contributions. You can decide which is more appealing: minimizing your taxes now through a deduction or minimizing your taxes in the future with tax-free earnings.
* Consult with your tax advisor for specific tax benefits or penalties.
Roth IRAs *
The Roth IRA is a non-deductible individual retirement account featuring tax-free withdrawals for certain distribution reasons after a five-year holding period. Roth IRA contributions are non-deductible and taxed in the year they are earned. Customers who expect to be in a higher tax bracket when they retire may benefit more from a Roth account than a traditional IRA.
The best part of a Roth IRA? You pay NO taxes on the earnings that your money has generated when the withdrawal is made after the five-year holding period for qualified reasons. With a Roth you can always get back your principal tax free and IRS penalty free for any reason. These IRA's are offered at the First National Bank Certificate of Deposit terms with a fixed interest rate, or choose the 18-month Variable Rate IRA and add funds during the term.
Note: The IRS will impose a 10 percent premature distribution penalty on certain withdrawals made before you reach the age of 59-1/2.
* Consult with your tax advisor for specific tax benefits or penalties.
Frequently Asked Questions:
How much can I contribute?
You may contribute any amount up to 100 % of your compensation or $2,000, whichever is less, as long a your modified adjusted gross income is within prescribed limits. Remember, $2,000 is the aggregate amount that you can contribute to any Roth or Traditional IRA in a given year.
Do I get a tax deduction for my contributions?
No. Money contributed to a ROTH IRA is taxable as income in the year it is earned.
Do I pay taxes on my earnings?
No, provided you withdraw the earnings as part of a qualified distribution. That's the best part of a Roth IRA. When you're ready to make a withdrawal, you pay no taxes on any of the earnings that your money has generated. Qualified tax-free distributions are those taken after the five year holding period for any of the following reasons: after reaching age 59-1/2, permanent disability, a first time home purchase, or in the event of your death.
When can I withdraw funds without incurring any IRS penalties?
The 10 percent IRS penalty does not apply to earnings you withdraw when you take any of the qualified distributions listed above. In addition, the penalty is also waived for certain other distribution reasons. For these distributions, taxes on any earnings will apply. Roth IRA distributions that are subject to taxes but no penalty include:
- substantially equal periodic payments
- your medical expenses are in excess of 7.5 percent of your adjusted gross income
- you use the withdrawal to purchase health insurance if you've been receiving unemployment compensation for at least 12 weeks
- for qualified higher education expenses
- for a first time home purchase
- distributions taken within the first five years if you reach age 59 1/2
- disability
- death
How are funds taxed at distribution?
Qualified distributions from a Roth IRA are, as mentioned above, not subject to federal income taxes (state taxes may apply). Beyond that, another helpful feature of the Roth is that, for non-qualified distributions, original contribution amounts are returned first. Contributions (as opposed to earnings) are not subject to taxation or penalty when distributed. In other words, you can always get back your principal tax free and IRS penalty free for any reason.
When must I withdraw funds?
There are no required distributions from a Roth IRA.
Why don't I just open both a Roth and a Traditional IRA?
You can and you should if possible! Opening both a traditional IRA and a ROTH IRA lets you develop your own blend of tax-deductible contributions. You can decide which is more appealing: minimizing your taxes now through a deduction or minimizing your taxes in the future with tax-free earnings.
* Consult with your tax advisor for specific tax benefits or penalties.
Educational IRAs *
The Education IRA is a non-deductible account featuring tax-free withdrawals for a very specific purpose - a child's higher education expenses.
First National Bank's Education IRA looks very similar to both the Traditional IRA and Roth IRA as education distributions are permitted from these accounts as well.
The major difference is that distributions made solely for higher education are penalty and tax free. Earnings on an Educational IRA are tax free to both the parent and child. These IRAs are offered at the First National Bank Certificate of Deposit terms with a fixed interest rate, or choose the 18-month Variable Rate IRA and add funds during the term.
Note: The IRS will impose a 10 percent premature distribution penalty on certain withdrawals made before you reach the age of 59-1/2.
* Consult with your tax advisor for specific tax benefits or penalties.
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