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Investment Center

Products: Traditional IRA/Roth IRA

What About Individual Retirement Accounts (IRAs)?
First Minnetonka Investment Center (FMIC) has both Traditional IRAs and Roth IRAs available. Individual Retirement Account (IRAs) allow for tax-advantaged investing, and you control how you invest the money. For example, you may purchase an IRA mutual fund, an IRA certificate of deposit, or an IRA annuity.

Think of an IRA as a folder in which you put all your stocks, bonds, mutual funds and other investments up to your allowable IRA amount. You can move your IRA money from one type of investment product to another as long as you continue to keep those investments in your IRA folder. Our Investment Advisor can help you decide how to invest your IRA contributions and make it easy for you to save.

Products: Traditional IRA

Current law allows individual contributions up to $5,500 per year. The contribution is tax deductible unless you (or your spouse) participate in an employer-sponsored retirement plan i.e. 401K plans, in which case the amount you may deduct could be phased out depending on your adjusted gross income. Be sure to check with your accountant or financial advisor to be sure you qualify.

Catch Up Provisions
Individuals age 50 and older may contribute up to an additional $1,000 to an IRA per year. IRA investments are not considered liquid money—you must leave your IRA investments untouched until age 59½ or pay a 10% early withdrawal penalty.

One important exception: If you cash out in regular installments before age 59½, there is no penalty but those payments must continue for five years or until you are 59½, whichever is longer. Our investment consultant can help you decide if this is an appropriate method for withdrawing funds from your IRA account. There are other ways you may withdraw money penalty-free (before age 59½) from a Traditional IRA. All withdrawals are taxed as ordinary income.

You must begin withdrawing assets from your Traditional IRA account, as well as any other retirement accounts such as a 401(k), at age 70½. IRS requirements must be followed when taking out your Required Minimum Distribution (RMD). Failure to do so by the deadline will result in a substantial penalty from the IRS.

Products: The Roth IRA

A Roth IRA is not deductible at the time of contribution, but it does have an attractive advantage over the Traditional IRA’s. Both the principal and earnings are income tax-free at payout after the owner reaches age 59 ½, assuming you’ve held it for five years. And unlike Traditional IRA’s, you aren’t required to begin taking a Required Minimum Distribution (RMD) at age 70 ½.

A Roth IRA does, however, have contribution limits in addition the income limits listed below.

In order to qualify to make a Roth IRA contribution, it does not matter if your employer offers some type of qualified plan, as is the case with Traditional IRA’s, it is based on income alone.

So, if you are single and have earned income less than $107,000 you may make a full Roth IRA contribution, if your income is between $107,000 and $122,000, you may make a partial Roth IRA contribution, and if your income exceeds $122,000 you may make no Roth IRA contribution.

If you are married filing a joint tax return, and you have earned income combined less than $169,000 you may make a full Roth IRA contribution. If your income is between $169,000 and $179,000 you may make a partial Roth IRA contribution, and if your income exceeds $179,000 you may make no Roth IRA contribution.

Roth IRA conversions
Unfortunately not everyone meets IRS standards to contribute to a Roth IRA.

The IRS has always allowed certain individuals to convert their Traditional IRAs to Roth IRAs as long as they met specific qualifications and paid income tax on the conversion. But high income earners were unable to convert until recently.

In the past to be able to convert from a Traditional to a Roth IRA your income needed to be under $100,000. The IRS rules have changed and there is no longer an income cap in place.

With the cap removed high income earners can now convert as long as they pay the appropriate tax on the conversion.

When you convert from a Traditional IRA to a Roth IRA you pay income tax on the contributions. The taxable amount that is converted is added to your income taxes and your regular income rate is applied to your total income.

Tax savvy investors want to pay as little income tax as possible. Converting to a Roth IRA allows you to make smart tax moves that can save money in the long run.

If you anticipate your income dropping significantly in a certain year (and increasing in following years) then a conversion could be done in the low income year. Since your income is lower you may be in a lower tax bracket when you convert.

Likewise if the government announced increase tax rate increases to go in effect the following year then a conversion in the current year could save income tax.

Converting to a Roth IRA give you access to money andl owe no additional income tax on the converted funds during retirement. The balance in your portfolio will be what you can tap into in retirement and you won't have to calculate an after-tax balance.

Even though high income earners can convert to a Roth IRA they may not be able to contribute additional funds. Roth IRA eligibility rules are still in place.

Catch Up Provisions
Individuals age 50 and older may contribute up to an additional $1,000 to a Roth IRA per year.

Like the Traditional IRA, you may invest in many different types of investments, including mutual funds, stocks, bonds and bank certificates of deposit. Our investment advisor can help you decide how to invest your Roth IRA contributions and make it easy for you to save.

Totally confused? Not sure which one is right for you? Our IRA Comparison Chart will help you sort through your options.

Still confused or ready for help? Contact us to schedule an appointment.

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Bank Among Friends
First Minnetonka City Bank
First Minnetonka Investment Center is a registered branch of LaSalle St. Securities, LLC.
Securities are offered through LaSalle St. Securities, LLC., Advisory Services offered through LaSalle St. Investment Advisors, LLC.
 LaSalle St. Investment Advisors, LLC is affiliated with LaSalle St. Securities, LLC.- a registered broker/dealer.
Tam Hubert, CFP® and Kristi Remus are registered representatives of LaSalle St. Securities, LLC.
940 N Industrial Dr., Elmhurst, IL 60126-1131. Member FINRA / SIPC. Not a deposit. Not FDIC insured.
Not insured by any Federal Government agency. Not guaranteed by the bank. May lose value.
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