IRA Required Minimum Distribution Waived for 2009

            President Bush signed into law the Worker, Retiree and Employer Recovery Act (WREPA) on December 23, 2008. Section 201 of this legislation waives the 2009 required minimum distributions (RMDs) for IRAs. 

            Therefore no RMD is required for 2009.  Any individual who attains age 70 ½ in 2009 will not be required to take a first RMD by April 1, 2010, but the distribution for the 2010 calendar year must be taken by December 31, 2010.

Below please find some frequently asked questions to help you understand current change better:

Q1. If I don’t take a 2009 RMD, won’t I be required to pay a tax penalty?
            No. Under the Act, there is no RMD required for 2009, and no tax penalty will be assessed if you do not take your RMD. In a normal year, the Tax Code assesses a 50% excise tax on any required distribution that fails to be distributed. But 2009 will not be a normal year. No excise taxes will apply because there will be no required distributions in 2009.

Q2. I’ve been taking RMDs for years and I’ve grown to depend on them as a source of retirement income. Can I still take the distribution that I had planned on?
            Absolutely. Your access to your contract hasn’t changed. The only thing that’s changed is that you aren’t required to take a 2009 minimum distribution. If you would like to take a distribution anyway, you can certainly do that.

Q3. I currently have a systematic withdrawal set up on my contract. Will I still receive my payments?
            A systematic withdrawal is an automatic withdrawal that you take monthly, quarterly or annually. If there is currently a systematic RMD withdrawal set up on your contract, and you wish to keep it, there is nothing you need to do. The payment you receive will be based on the RMD calculation. However, you may elect to receive a systematic withdrawal in any amount that you request.

Q4. If I stop my payments, what will happen in 2010?
            Starting in 2010, your systematic payments will resume in accordance with your original instructions.

Q5. How do I stop my payments?
            If you wish to stop receiving the payments, please contact us.
In any case if you should have any further questions please contact your local branch for assistance.

Sincerely,

UFCU IRA Department

Work, Save, and Retire Well with a ROTH IRA

The Roth IRA was created on January 1, 1998 as a result of the Taxpayer Relief Act of 1997 and named after the late Senator William V. Roth, Jr. The Roth IRA goal was and is to encourage Americans to save for a more secure retirement future. Its’ purpose is to provide a benefit that isn’t available for any other form of retirement savings -- all earnings grow tax-free. Additional benefits include no early distribution penalties on certain withdrawals and no minimum distribution requirements after age 70½. The Roth IRA made it easier to keep your money in, and also easier to take your money out of an IRA account. The only disadvantage -- you don’t get an income tax deduction when you contribute to the Roth IRA.

Eligibility

You can establish a Roth IRA at any age. One of the smartest money moves you can make -- is to invest in a Roth IRA. Following the IRA rules, any money put into a Roth IRA retirement-savings account grows absolutely tax-free.  And -- when cashing out in retirement, all the funds are tax-free. Setting up a Ukrainian FCU Roth IRA account is an excellent way to start on the road to a secure retirement future.

As with all retirement accounts, the government does set a limit on how much anyone can contribute to a Roth IRA. That limit is $4,000 for 2007, ($5,000 if you’re 50 or older by the end of the tax year) and $5,000 in 2008 (plus an additional $1,000 annual 50+ catch-up).  Those contribution amounts however, cannot be greater than total income earned during the year.

The idea of not paying taxes on dividends earned on a Roth IRA may not seem much at first, but it really can pay off big in the long run. If you are 25 years old and you can contribute at least $3,000 each year with a dividend rate of between 4% - 5%, you’ll have more than $300,000 saved by age 65 – with all the earnings tax-free.

You may make regular contributions to a Roth IRA even if you participate in a retirement plan maintained by your employer, such as a 401K plan or a defined benefit plan. There are just two requirements for contributions. First, you must have earned compensation and second, the modified adjusted gross income (MAGI) can’t exceed certain limits. For the maximum contribution, the limits are $95,000 for single individuals and $150,000 for married individuals filing joint returns. The contribution amount is reduced gradually and then eliminated when your modified adjusted gross income exceeds $110,000 (single) or $160,000 (married filing jointly). These dollar limit amounts are inflation-adjusted for later years.

Distributions

Distributions from Roth IRAs are tax-free if you’re over age 59½ and at least five years have expired since you established your Roth IRA.

Bonus!

In addition to the savings power, flexibility and tax-free status of the Roth IRA, there are a few extra benefits, making the Roth an indispensable tool throughout your financial life.

- You can withdraw your contributions at any time, tax free and without penalty -- and you don’t have to pay it back, like with a 401K plan.  However, if you withdraw any of your earnings before age 59½, you’ll trigger a tax bill on the money, plus a 10% penalty. Therefore, it’s better to leave all the earnings on account until well into retirement.
- You can tap your Roth to buy your first home. The IRS lets you cash out up to $10,000 per person ($20,000 for a couple) tax-and-penalty-free -- which can include earnings. However, the account must have been open for at least five years. If you don’t meet the five-year test, you still can take out the money for your home purchase, but you’ll have to pay taxes on it but no 10% early-withdrawal penalty.
- The Roth IRA can also be used for college tuition. By starting a Roth IRA you have the opportunity to save both for your own retirement and, just in case, for your children’s higher education.  However, it’s better to start a Coverdell Education Savings Account at UFCU for that purpose. You can, of course, take out your contributions at any time to help pay for college tuition.  As with the first-time homebuyer, if you dip into earnings, you’ll owe taxes -- but no 10% early-withdrawal penalty.
- All IRA retirement accounts – traditional, Roth and Coverdell are now insured and completely protected up to $250,000 by the NCUSIF and backed by the full faith and credit of the US government.  That’s just another good reason to save for your future at the Ukrainian Federal Credit Union.

How to open a Roth IRA

When you’re just getting started investing for your retirement future, the Roth should be your first step – even if you contribute to a workplace retirement-savings plan.

Not sure where to find the money to fund your account? Consider investing your annual Federal or State tax refund. More than half of all taxpayers get a tax refund. On average the refunds totaled more than $2,000. That makes a great way to start or add to Ukrainian Federal Credit Union Roth IRA account.

Another way to fund your Roth IRA account is to put it on automatic direct investment from your share draft/checking account. It’s much easier to “pay yourself first” automatically with small increments than to make the effort to write a check monthly or wait to accumulate a larger amount for that annual contribution by April of each year. For more information on how to set up a UFCU Roth or Traditional IRA or a Coverdell Education Savings Account, visit or call your nearest UFCU branch at 877-968-7828.

We are always ready to serve your financial needs to provide for a secure retirement future.

Sincerely,

UFCU IRA Department