Individual Retirement Accounts (IRAs)

ROTH IRAS

A Roth IRA account offers more flexible withdrawals than a Traditional IRA. Contributions aren't tax deductible, but you can enjoy tax-free withdrawals in retirement or when you meet the criteria.  

• Contribute from post-tax, earned income up to $7,000 a year if you're under age 50 or $8,000 over 50 in the 2025 tax year
• Contributions are not tax-deductible but earnings grow tax-free
• Withdraw contributed funds tax-free at any time and withdraw earnings tax-free if you’re at least 59½ years old and your account has been open for five years
• Pay taxes if you withdraw earnings before five years or before you turn 59½ unless funds are used for eligible exceptions such as higher education or a first home
• No required minimum distributions (RMDs)

EDUCATIONAL IRAS

Also known as a Coverdell Education Savings Account (ESA), this IRA account can help you prepare for your child's future. Contributions aren't tax deductible, but contributions and earnings can be withdrawn tax-free when used to pay for qualified education expenses.

• Open before your child or beneficiary turns 18
• Contribute up to $2,000 a year from post-tax, earned income.  
• Withdrawals for qualified education expenses can be made tax-free until the beneficiary turns 30
• Pay penalties and taxes on withdrawals after age 30 unless you meet exception criteria  
• It is possible to open more than one ESA IRA for the same child
• Unspent savings can be transferred to a second beneficiary

BENEFITS OF AN IRA 

Wasatch Peaks Credit Union offers a range of Individual retirement accounts to our members in Utah. Here's how an IRA account can help you prepare for the future:

• No minimum deposit 
• Start earning interest on any amount
• Choose a Traditional IRA if you want tax-deductible contributions
• Choose a Roth IRA if you want tax-free withdrawals
• Choose an ESA IRA to save for K-12, college, and higher education expenses
• All our IRAs are available as IRA Certificates that let you earn higher rates over a range of terms
• Deposits are insured by NCUA up to $250,000

FAQ ABOUT AN INDIVIDUAL RETIREMENT ACCOUNT (IRA)

• When should I open an IRA account?

  An IRA is a tax-advantaged investment account that you can open at any time, no matter your age or whether you have an employer-sponsored plan. However, there are a few guidelines to be aware of:
  

  • You can contribute to an IRA at any age as long as you are employed with earned income.
  • You can contribute up to $7,000 a year to a Roth or Traditional IRA if you're under 50 in 2025.
  • You can contribute up to $8,000 a year to a Roth or Traditional IRA if you're over 50 in 2025.
  • You can contribute up to $2,000 a year to an ESA IRA until your child reaches age 18 and you need to open the account before they turn 18.

  Depending on your modified adjusted gross income and filing status, you may be able to open a Traditional or Roth IRA even if you have a 401(k) or another type of employer-sponsored retirement plan. However, contributions to a Traditional IRA may not be tax deductible if also contributing to an employer-sponsored retirement plan.

• How is a Traditional IRA different from a Roth IRA?

  Traditional and Roth IRAs feature both similarities and differences: 
  

  • Both accounts let you contribute up to $7,000 a year (or $8,000  if you're over 50), and contributions must be from earned income, so you need to be employed.
  • You can deduct contributions to a Traditional IRA, whereas contributions to a Roth IRA are not deductible.
  • You pay ordinary income tax on withdrawals from a Traditional IRA, whereas qualified withdrawals from a Roth IRA are generally tax-free.
  • You need to wait until you're 59½ to withdraw funds from a Traditional IRA (unless you meet exception criteria), whereas a Roth IRA lets you withdraw contributed funds at any time, and earnings without penalty if you’re 59½ and it’s been five years since you opened the account.
  • A Traditional IRA has required minimum distributions (RMDs) starting at age 73, whereas a Roth IRA has no RMDs.

  Note that credit union IRAs earn guaranteed dividends and interest. They are not invested in the stock market, exchange-traded funds, or mutual funds. This means your funds and earnings are secure.

• When can I withdraw funds from an IRA?

  Withdrawal rules vary based on your chosen type of IRA:

  • You likely need to pay a 10% penalty tax on withdrawals from a Traditional IRA if you're under 59½.
  • You may withdraw your Roth IRA contributions anytime without paying taxes or penalties, unless it's an IRA CD, and then you need to wait until the end of the CD term.
  • You may withdraw your Roth IRA earnings without penalty when you turn 59½ and five years after opening the Roth — early withdrawals of your earnings will be subject to income tax.
  • You may withdraw funds from an ESA IRA when your child is any age, provided the funds are being used for qualified education expenses.
  • You should complete withdrawals from an ESA IRA before your child turns age 30, or you will likely need to pay penalty taxes. Exceptions include children with special needs.

• What are the exception criteria for early withdrawal from a Traditional IRA?

  In many cases, you need to pay a 10% early penalty tax if you withdraw funds from a Traditional IRA before age 59½. Here are some exceptions:

  • A down payment toward your first home up to $10,000
  • Qualified higher education expenses
  • Unreimbursed, out-of-pocket medical expenses
  • Health insurance premiums if you're unemployed
  • A permanent disability
  • Unpaid federal taxes
  • You are called to active duty
  • Inherited IRAs

• At what age should you start an IRA?

  It’s important to begin saving for retirement as soon as you are able. You can open an IRA at any age. However, contributions need to be made from earned income, so ideally you should open an IRA as soon as you begin to earn a steady income.

• How much money do I need to open a retirement account?

  There is no minimum deposit to open a Traditional or Roth IRA at Wasatch Peaks Credit Union. There are also no minimum restrictions on your annual contributions.

• How to start a retirement account?

  You can start a retirement account by applying to open an IRA at Wasatch Peaks Credit Union or another financial institution. If you are not already a Wasatch Peaks member, then you will need to join.

  1. Decide if you want to open a Traditional or Roth IRA
  2. Apply to open an IRA (you may need to provide proof of identity or address)
  3. Fund your account with as much as you wish to contribute initially

• What are the pros and cons of individual retirement accounts?

  Individual retirement accounts (IRAs) have many advantages, allowing almost anyone to prepare to support themselves once they stop working. Your contributions benefit from the effects of compound interest over years, as well as from different types of tax advantages. 
  
  The only major disadvantage of an IRA is that once funds are contributed, they usually cannot be withdrawn to be spent or invested elsewhere until distributions begin at age 59½.

• How many retirement accounts can I have?

  There is no limit to the number of retirement accounts you can have. However, you cannot contribute more than the annual allowed maximum, which applies across all your accounts.

• How is an ESA IRA different from a 529 plan?

  An Educational IRA is more formally known as a Coverdell Education Savings Account (ESA). It's an account designed to help you save for your child's education, whether that's for your college savings fund or another form of higher education. You may also use the funds for K-12 expenses, books, supplies, computers, and more. 
  
  A Coverdell ESA is similar to a 529 savings plan but there are a few differences. An ESA IRA has contribution limits based on the parents' income and the funds must be withdrawn before the child turns 30. A state-sponsored or private 529 plan has no income restrictions, although there are often restrictions on where and how the money can be spent. 
  
  It's a good idea to open both types of accounts if you're eligible for them. That way, you can enjoy as many advantages as possible and offer your child the best education available.

• Where can I spend my Coverdell ESA withdrawals?

  Funds withdrawn from a Coverdell IRA or ESA IRA must be spent on qualified education expenses. In practice this includes a wide range of educational necessities, including accommodation, tuition, books, computers, stationary, and clothing. A cuddly Weber State Wildcats mascot? You’re probably on your own!

• Do I need to join Wasatch Peaks Credit Union to open an IRA or ESA IRA account?

  Yes, you need to join the credit union, and becoming a member is easy! You simply need to meet these criteria:

  • You are an immediate family member of an existing member-owner, such as a parent, child, brother, sister, spouse, or surviving spouse.
  • You live, work, worship, or attend school in Weber, Morgan, or Davis Counties in Utah, or within a select underserved community located in Box Elder, Salt Lake, Summit, Utah, Tooele, and Juab Counties.
  • You’re a member of Trails Foundation of Northern Utah (TFNU.org), a 501(c)(3) NGO functions as a planner, promoter, constructor, and protector of a network of public paths, trails, and related open spaces for non-motorized use. Not a member of the Trails Foundation Northern Utah? Wasatch Peaks will enroll you at no additional cost to you.
  • None of these fit, but you still want to join? A Wasatch Peaks Member Service Representative will find the best eligibility option for you.