IRA/ESA Accounts & CDs

Individual retirement accounts and educational savings accounts are programs that may provide tax savings for retirement or education. They are available in a number of forms and you should consult your tax advisor or attorney regarding tax issues specific to your circumstances. Here however, are the basics:

Traditional IRA Certificate

Tax deductible contributions (depending on income level)
Withdrawals begin at age 59 ½ and are mandatory by age 72
Taxes are paid on earnings when withdrawn from the IRA
Any funds withdrawn (including principal contributions) before age 59 ½ are subject to a 10% penalty (subject to exception)

Roth IRA Certificate

Contributions are not tax-deductible
No mandatory distribution age
All earnings and principal are tax-free if rules and regulations are followed
They are available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually
Principal contributions can be withdrawn at any time without penalty (subject to some minimal conditions)

IRA Shared

Your IRA Share account can be established as either a traditional IRA or Roth IRA and the same conditions apply. The difference is that you can make deposits to your IRA Share during the year rather than making one lump deposit.

ESA Share Account

The same conditions apply to your ESA Share account as the regular Coverdell ESA. The difference is that you can make deposits to your ESA Share during the year rather than making one lump deposit.

Certificate of Deposits

Whether saving for the short or long term, there’s a CD that’s just right for you. Choose terms ranging from 3 months to 5 years. Some of our CDs even have a “bump up” feature letting you increase the rate of your CD should interest rates increase during the period.

You can also borrow up to 90% of your CD balance at a rate 3% over the interest you are earning on your Certificate of Deposit.

Coverdell Education Savings Certificate

A Coverdell Education Savings Account (ESA) was created as an incentive to help parents and students save for education expenses. The total contributions for the beneficiary of this account cannot be more than $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary.
Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses.
Distributions are tax-free as long as used for qualified education expenses
There is no tax on distribution if used for enrollment at an eligible educational institution
If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax
There are contribution limits for taxpayers based on the contributor’s Modified Adjusted Gross Income

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Wave FCU Main Branch

Address: 480 Greenwich Ave, Warwick, RI 02886

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Warwick Avenue Branch

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