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IRAs

A Citizens Bank Individual Retirement Account (IRA) gives you tax advantages for long-term retirement savings. The sooner you begin contributing to an IRA and the longer you let your money grow, the more you benefit. Our bank-offered CD IRAs are one of the safest ways to save for retirement, as they are FDIC insured with a guaranteed rate of return.

Traditional IRA
Education IRA
Freedom IRA (not a CD type)
Roth IRA


Rollovers, Transfers, Direct Rollovers

Your individual Retirement Account is your first line of defense in building assets for a comfortable retirement. Because an IRA is so important to your future well being, it is vital that you place your funds where they will give you one of the best combinations of service, safety, and earnings.

A rollover or transfer allows you to move your retirement funds without incurring immediate taxation or penalties, thus ensuring that your retirement dollars continue to grow tax-deferred until you need them.

What Are Rollovers And Transfers?
Rollovers and transfers are both ways to move retirement assets from one plan to another. In a rollover, you take receipt of your funds before depositing them in another account. In a transfer, your funds are moved directly from one trustee to another.

Why Would You Want To Make A Transfer Or Rollover?

There are many reasons for moving retirement funds, but the most common are:
  • Relocation to another geographic area.
  • Consolidation of several IRAs into one account.
  • To obtain better service, greater safety or convenience.

    ROLLOVERS
    What Are The Rules Governing Rollovers?
    There are a number of rules you must follow to achieve a tax-free rollover of IRA funds:

  • You must deposit the funds into another IRA within 60 days of the date you receive them. If you keep any of the funds, that portion of the money is taxable and may be subject to an IRS penalty on early distributions.

  • You can roll over the funds in any given IRA only once during a 12-month period.

  • If you are age 70 ½ or older when you take funds from your IRA, you cannot roll over your minimum required distribution for the year. If you do, the amount of your minimum required distribution will be considered an excess contribution to your new IRA and may be subject to an IRS penalty.

  • You will have to document your rollover transaction when you file your federal taxes, even though it is not a taxable transaction. This is true because the trustee or custodian of the IRA from which the funds were disbursed is required to report the amount of the distribution to the IRS. Therefore, you must show the IRS that you rolled these funds over within the required 60-day limit.


    TRANSFERS
    What Are The Rules Governing Transfers?
    Transfers are somewhat easier than rollovers.

  • You can transfer all or part of an existing IRA to a new account.

  • The transaction is not reported to the IRS, so there's no additional documentation on your federal income tax return.

  • Since there is no limit on the number of transfers you can make within a 12-month period, you can time transfers of Certificates of Deposit and similar investments to match maturity dates, thus avoiding loss-of-earnings penalties.

    Does A Transfer Or Rollover Affect Current Contributions To An IRA?
    Transferring or rolling over funds from one account to another does NOT affect the amount of your annual IRA contribution. You may still contribute the full amount allowed by law.


    DIRECT ROLLOVERS & DISTRIBUTIONS
    From Qualified Pension Plans
    If you receive a lump sum distribution from a qualified pension plan, you may be able to roll those funds over into an IRA and, thereby, keep them growing tax-deferred until you really need them. If you choose not to roll over all or any portion of your distribution, the portion you do not roll over may be taxable and subject to an IRS early distribution penalty of 10%. It will also be subject to a mandatory 10% federal income tax withholding, for a total of 20% in withholdings. Qualified retirement plans include pension, profit sharing, 401(k), stock bonus, Keogh, and 403(b) plans.

    You may receive a distribution from a qualified plan because:

  • You leave your current employer, voluntarily or involuntarily (this does not apply to self-employed persons, unless they are disabled).

  • The plan is terminated.

  • You reach age 59 ½.

  • You become totally and permanently disabled (this applies only if you are self-employed).

  • You receive ownership of a qualified retirement plan account from a former spouse under a qualified domestic relations order.

  • Your spouse dies and you inherit the funds in his or hers qualified retirement plan.


    Which Distributions Are Eligible For Rollover?

    Generally, you can roll over all taxable distributions you receive from a qualified plan, including employer contributions, earnings and deductible employee contributions. Distributions that are NOT eligible for rollover include:

  • Substantially equal payments made systematically (at least annually) over your life expectancy or over the joint life expectancy of you and your beneficiary or over a specified period of 10 or more years.

  • Required minimum distributions made after you reach age 70 ½.

  • A return of voluntary after-tax contributions you made to the plan.


    How Do You Roll Over A Lump Sum Distribution?

    You can effect a rollover from a qualified plan in one of two ways:

  • Direct rollover - the funds from your qualified plan account are sent directly to the trustee or custodian of your IRA.

  • Distribution to you - you have 60 days to redeposit the distribution as a rollover. If you choose this option, however, be aware that the administrator of the qualified plan is required by law to withhold 20% of your distribution for federal taxes. That can have a significant financial impact on you, as the following example illustrates.

    Suppose you are entitled to a lump sum distribution of $20,000. If you choose to receive the funds, your employer is required to withhold $4,000, so you actually receive only $16,000. Under current tax law, you are considered to have made a "withdrawal" of that $4,000 - and you will owe taxes on that amount - unless you can come up with the $4,000 out of pocket and put it into the rollover credited with a tax payment of $4,000 when you file your tax return - but coming up with the money within the required time may cause you hardship. It's better to avoid this situation by having your funds rolled over directly to your IRA.


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