Savings Help

• The Basic Comparison calculator estimates whether a Traditional IRA or a Roth IRA would provide more assets at retirement. 
• The Legacy Planner estimates which IRA will best benefit your beneficiary after your death. 
• The Breakeven Analyzer estimates the time frame when one type of IRA becomes more beneficial than the other to save for retirement.

The following charts explain the eligibility requirement for contributions.

If your MAGI is under the applicable income limits, you may make a contribution to a Roth IRA as long as you have earned income.

You may annually contribute up to the lesser of

• 100 percent of earned income, or
• the statutory limit for the year ($6,000 in 2021)

The annual contribution limit is subject to cost-of-living-adjustments (COLAs).

In addition, if you are age 50 or older, an additional amount (called a catch-up contribution) may be contributed to your IRA. Your catch-up contribution can be up to $1,000 annually.

You can distribute your Traditional IRA assets at any time, subject to taxes and penalties. Assets distributed from a Traditional IRA generally are included in gross income in the tax year that they are received unless one of the following apply.

1. Distribution is rolled over or transferred to an IRA or other eligible retirement plan
2. Distribution of excess contributions removed before the tax return due date, including extensions (but the net interest attributable to the excess is includable in gross income)
3. Transfers or rollovers incident to divorce
4. Distribution of nondeductible IRA contributions

Taxable distributions from a Traditional IRA are taxed as ordinary income.

10 Percent Early Distribution Penalty Tax

If a distribution is taken from your IRA before the day you attain age 59½, the distribution is included in your gross income and a 10 percent early distribution penalty tax applies. This penalty tax generally does not apply if a distribution is taken because of one of the following reasons.

• Death
• Disability
• Rollover to another IRA or an eligible retirement plan
• Qualifying medical expenses
• Health insurance premiums for unemployed individuals
• First-time homebuyer expenses
• Qualified higher education expenses
• Substantially equal periodic payments
• IRS levy
• Qualified reservist distributions

Required Minimum Distributions

You are required to take distributions from your Traditional IRAs beginning the year you attain age 72. If you fail to take a required minimum distribution (RMD), you must pay a 50 percent excess accumulation penalty tax on the amount of the RMD that was not distributed. IRA distributions must begin by your required beginning date for RMDs, which is April 1 of the year following the year you attain age 72. Distributions for each subsequent year must be taken by December 31 of that year.

You can take

• the required amount or
• any amount greater than the required amount.

For more information about RMDs, see a tax advisor.

The taxation of a Roth IRA distribution depends on what assets are being distributed and whether the distribution is considered qualified or nonqualified.

Qualified Distributions

A distribution from a Roth IRA may be taken tax-free and penalty-free if it is a qualified distribution. A qualified distribution is one that satisfies a five-year waiting period, beginning with the year for which you first contributed to a Roth IRA, and one of the following events occurs.

1. Attainment of age 59½
2. Death
3. Disability
4. First-time homebuyer

Nonqualified Distributions

If a distribution from a Roth IRA is not qualified, taxes and penalties may apply. To determine the taxation, you'll need to understand the ordering rules for a Roth IRA distribution.

Ordering Rules for Distributions

The ordering rules state that if a Roth IRA owner has made both contributions and conversion or retirement plan rollover contributions to Roth IRAs, the assets are distributed in the following order.

First: Contributions
Second: Conversions and retirement plan rollovers (by year)
Third: Earnings

Contributions and conversion/plan rollovers are not subject to tax when distributed. In some circumstances, however, distributed conversion/plan rollover assets might be subject to the 10 percent early distribution penalty tax. Earnings are taxable and subject to the penalty tax in a nonqualified distribution. But if the distribution is qualified, none of the distributed assets are taxable.

It is your responsibility as a Roth IRA owner to determine the taxation of your Roth IRA distributions by filing IRS Form 8606, Nondeductible IRAs,with your income tax return.

Required Distributions

Roth IRA owners are not required to take distributions (RMDs) from their Roth IRAs. Beneficiaries of Roth IRAs, however, generally are required to take distributions. Spouse beneficiaries may treat the inherited Roth IRA assets as their own, and if doing so, are not required to take distributions.

At 1st Source Bank, our client appreciate the value of relationships and having a partner that provides straight talk and sound advice while always keeping your best interests in mind. That's why we do things a little differently than some other banks. For instance, although we may be able to accept loans from anywhere in the country, we choose to offer them in the markets we serve. That means, even if you like to do business electronically, you can be assured you're never far away from a real person when you need one.

In our effort to balance client convenience with employee family life, all 1st Source's offices (including Banking Centers) will observe the holiday schedule below. For standard business hours, please reference our locations section: