Understanding Traditional IRAs and Their Benefit

Individual Retirement Accounts or IRAs, are an ideal way to save for your retirement. Many people mistakenly think an IRA itself is an investment - but it's just the basket in which you keep various types of investments that you choose. Community First Bank's IRA is deposited in Certificate of Deposits. You choose a specific term and are guaranteed that rate/APY until the maturity of the CD.

There are several different types of IRAs, including traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. The most popular IRA plan is a Traditional IRA.

With a traditional IRA, you pay the taxes on your earnings when you withdraw the money in retirement. Your money grows tax free while it's in the account. Deferring taxes means all of your interest earnings can compound each year without being hindered by taxes - allowing an IRA to grow much faster than a taxable account.

Almost anyone with earned income can contribute to a traditional IRA. For the year 2013 your maximum contribution is the lesser of your earned income or $5,500 if you are age 49 and younger or $6,500 if you are age 50 or older. Making the maximum amount is a wise decision if you are able to do so, but any amount that you are able to contribute will be helpful as you look towards retirement. Contributions to a Traditional IRA might be fully deductible, partially deductible or entirely nondeductible, depending on factors such as your age, total income, marital status, filing status and whether you or your spouse are covered by a retirement plan through your employer. Contributions to IRAs can be made as late as the first due date of a tax return and can be considered retroactive to the previous tax year. We would encourage you to contact your tax advisor for guidance of the taxable effects and appropriate options when selecting the IRA product that best fits your needs.

Traditional IRAs are a great product to include in your retirement planning portfolio. Stop by and visit with one of our Personal Bankers for more information.