Individual Retirement Accounts (IRAs)

Learn about the different types of Individual Retirement Accounts (IRAs), including Traditional, Roth, SEP, and SIMPLE, and their benefits for retirement savings

“SouthStar Bank is one of the nicest banks around, both in terms of its people and facilities. They have always given immediate and personal attention to any banking request.” ~ Bruce Karnes

IRA ACCOUNTS

An Individual Retirement Account (IRA) is a type of savings account that is tax-free, making it an attractive option for people who are saving money for their retirement. Not everyone can enjoy the benefits of an IRA, but for those who are eligible, it’s a convenient and cost-effective way to help you save for retirement.

Types of IRAs:

Traditional IRA

A traditional IRA is an account where your investments grow tax-deferred, and the contributions can be tax-deductible. There is also no income cap for contributions. Many retirees find themselves in a lower tax bracket than they were in pre-retirement, so the tax deferral means the money can be taxed at a lower rate.

Roth IRA

A Roth IRA is an account where your money grows tax-free, and your withdrawals in retirement are also tax-free. However, there is an income limit, and contributions are not tax-deductible. After five years of contributing, you can take out the money you contributed anytime without penalty. However, we recommend consulting a banker before you do this to make sure you’re following all the IRS guidelines.

Simplified Employee Pension (SEP) IRA

The Simplified Employee Pension IRA is for self-employed freelancers and small business owners with at least one employee. The contributions are tax-deductible, with the account held in the employee’s name. The employer makes the contributions, and money is only taxed upon withdrawal.

Savings Incentive Match Plan for Employees (SIMPLE) IRA

The Savings Incentive Match Plan IRA is a retirement savings account for small companies, generally with 100 or less employees. Contributions are tax-deductible, and tax is deferred until you make a withdrawal upon retirement. Compared to a 401K, employers are required to contribute, and unlike a SEP, employees can contribute as well.

Types of SDIRAs:

Checkbook IRA with Custodian Control

A Checkbook IRA, also known as a Self-Directed IRA with Checkbook Control, provides greater investment freedom and control. With a Checkbook IRA, you can make investment decisions and manage your retirement funds more directly. They also give you the ability to invest in alternative assets beyond the traditional options. With the addition of Checkbook authority for this IRA type, accountholders enjoy more convenient access to funds compared to other IRAs.

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Open a IRA Account

Your SouthStar Bank Personal Banker can walk you through the IRA rules and requirements, including recent changes regarding maximum IRA contributions and required minimum distributions.

Contact our IRA Account Specialists today!

Dayton Mejias
AVP/IRA Development Officer
361.596.4611
dayton.mejias@southstarbank.com

Bridget Brosh
AVP/Branch Manager/IRA Coordinator
361.596.4611
bridget.brosh@southstarbank.com

Frequently Asked Questions

How Does an IRA Account Work?

Unlike a 401(k) plan, the most common IRAs (Traditional and Roth) are set up by individuals rather than by companies for their employees. There are rules for withdrawals and how much you can contribute every year. Not following these rules may lead to IRS penalties when you file your taxes.

How Does an IRA Differ from a 401(k) Account?

While both types of retirement accounts offer tax benefits, employers offer 401(k)s to their employees and will often match the percentage of employee contributions. IRAs are opened by individual taxpayers. It is possible to have both at the same time. Contribution limits are much higher for a 401(k), but with an IRA, you can choose the individual investments.

How Can I Open an IRA?

Opening an IRA at SouthStar Bank is simple.

Decide how much you want to open it with and for how long you want it to mature.
Visit one of our branches.
Provide identification, choose beneficiaries, sign paperwork and make an initial contribution.

SouthStar Bank IRAs are invested in CDs (Certificates of Deposit), so the interest rates are paid based on the terms of your account.
When opening your IRA, consider these questions:

Do you have a 401(k) account that you’d like to rollover or transfer?
Do you have a Traditional IRA that you want to convert to a Roth IRA?

How Can Opening an IRA Benefit Me?

An Individual Retirement Account offers important benefits for taxpayers.

Great Investment – An IRA continues to work for you, earning money over time.
Retirement Savings – When you retire, that money is available to you.
Lowers Taxable Income – With a Traditional IRA, your annual contribution lowers your taxable income while you’re still working, which keeps more money in your pocket.
Earns Interest Tax-Free – With a Roth IRA, interest that is earned year after year is not taxed.
Excellent Alternative to an Employer Plan – If your employer does not offer a 401(k) plan, an IRA ensures that you have money saved for retirement.