Traditional IRA
A Traditional IRA is one of the most straightforward ways to start saving for retirement. Contributions are made with pre-tax dollars, which means you may be able to deduct them from your taxable income now and defer taxes until you make withdrawals in retirement. Anyone with earned income can contribute regardless of age, and the 2025 limit is $7,000 per year, or $8,000 if you are 50 or older. For members who expect to be in a lower tax bracket when they retire, a Traditional IRA is a smart way to reduce your tax burden today while building long-term savings at AGCU.
Roth IRA
A Roth IRA flips the tax equation: you contribute after-tax dollars now, and in return, your money grows tax-free and qualified withdrawals in retirement, including earnings, are completely tax-free. There is no age limit to contribute, no required minimum distributions during your lifetime, and you can withdraw your contributions at any time without penalty. The 2025 contribution limit is $7,000, or $8,000 for members age 50 and older, subject to income eligibility. For those who expect their tax rate to be higher in retirement, or who simply want more flexibility down the road, a Roth IRA at AGCU is a powerful long-term tool.
SEP IRA
A SEP IRA, or simplified employee pension, is designed for small business owners and self-employed individuals who want to save for retirement while also providing a benefit to employees. Rather than the employee funding the account, the employer makes contributions directly into each eligible employee’s IRA, where the funds become subject to standard IRA rules. Contribution limits for SEP IRAs are significantly higher than those for Traditional or Roth IRAs, making them an efficient option for self-employed members who want to maximize retirement savings. If you run your own business in Springfield and are looking for a tax-advantaged way to save, AGCU can help you get a SEP IRA in place.
Coverdell ESA
A Coverdell Education Savings Account is built specifically for education, giving families a dedicated place to save for a child’s schooling from kindergarten through college. Contributions are not tax-deductible, but earnings grow tax-deferred and withdrawals used for qualified education expenses are completely tax-free. Each beneficiary can receive up to $2,000 in contributions per year from any combination of family members or other contributors, and funds can be used for tuition, books, and other approved costs at eligible institutions. For Springfield families who want to get ahead of rising education costs, a Coverdell ESA at AGCU is a focused, tax-smart savings option worth starting early.
How to open an IRA Account at AGCU
Opening an IRA at AGCU takes just a few steps. You can get started online, by phone, or at any Springfield branch.
Steps
1 Check your eligibility
To open a Traditional or Roth IRA, you need eligible compensation, which is generally income earned from work. Roth IRA contributors also need to meet income limits based on their tax filing status. There is no minimum age requirement, and since 2020 there is no maximum age either.
2 Choose your account type
Decide between a Traditional IRA, Roth IRA, SEP IRA, or Coverdell ESA based on your tax situation, retirement timeline, and savings goals. Not sure which fits best? An AGCU team member can walk you through the differences at any branch or over a video call.
3 Apply online or visit a branch
You can open your IRA through AGCU’s online application, by beginning a video call with a team member, or by visiting any AGCU branch in Springfield. Have your government-issued ID and Social Security number handy.
4 Fund your account
Make your initial contribution to get your IRA active. For 2025, you can contribute up to $7,000 ($8,000 if you are age 50 or older). You have until the tax filing deadline, generally April 15, to make contributions that count toward the prior tax year. Ask about pairing your IRA with a certificate of deposit for a guaranteed rate of return.
IRA FAQs
What is an IRA?
An individual retirement arrangement (IRA) is a special domestic trust, custodial account, or annuity endorsement established to hold assets for an individual’s retirement. An IRA is not a certificate of deposit, money market account, or any other type of investment.
What is the difference between a SEP IRA and a Traditional IRA?
A simplified employee pension (SEP) plan allows employers to make discretionary contributions to an employee’s IRA. Once the employer or employee makes a SEP plan contribution to an IRA, the contribution becomes IRA assets subject to IRA rules and regulations.
Who is eligible to make Traditional IRA contributions?
Anyone with eligible compensation may contribute to a Traditional IRA. For 2019 and prior years, however, an IRA owner also had to be under age 70½. The SECURE Act removed this age restriction, effective January 1, 2020. Eligible compensation generally is what an individual earns from working (earned income from personal services rendered).
What is the deadline for making a Traditional IRA contribution for a noncalendar-year taxpayer?
IRA owners have until the deadline for filing their federal tax returns to make a Traditional I RA contribution regardless of whether they file on a non-calendar-year basis. Almost all individual taxpayers file on a calendar-year basis, and generally have until April 15 to make a Traditional IRA contribution.
Can individuals age 70½ or older make contributions to Traditional IRAs?
Yes. Effective for 2020 and later tax years, IRA owners with eligible compensation can make Traditional IRA contributions at any age.
What is the contribution limit for a Traditional IRA?
An eligible individual may contribute the lesser of the annual contribution limit ($7,000 for 2024 and for 2025), or 100 percent of eligible compensation (generally, earned income), to an IRA. Also, IRA owners who are age 50 and older may make catch-up contributions of up to $1,000 annually. The contribution limit is an aggregate limit for all Traditional and Roth IRAs. So, the maximum amount that an individual may contribute to a Traditional IRA is reduced by any contributions the individual has made to other Traditional IRAs and to Roth IRAs for the same year.
When must IRA owners begin taking money out of their Traditional IRAs?
IRA owners must begin taking money out of their Traditional IRAs by April 1 of the year following the year in which they attain the applicable RMD age (also known as the IRA owner’s required beginning date). The minimum amount that the IRA owner must distribute for a given tax year is called the required minimum distribution (RMD). The SECURE 2.0 Act of 2022 increased the applicable RMD age again to age 73 in 2023 and to age 75 in 2033. Beginning in 2023, failure to remove an RMD results in an excess accumulation penalty tax equal to 25 percent of the amount that should have been withdrawn, and is further reduced to 10 percent if corrected timely. (Before 2023, the penalty tax was 50 percent of the amount that should have been withdrawn).
What are qualified charitable distributions?
Qualified charitable distributions (QCDs) are distributions that an IRA owner or beneficiary who is age 70ó or older donates directly to qualified charitable organizations. These IRA distributions are tax-free and are limited to $105,000 for 2024 and $108,000 for 2025. They also may go toward satisfying an IRA owner’s or beneficiary’s RMD for the applicable year.
What is a Roth IRA?
A Roth IRA is a type of IRA, first available January 1, 1998, where contributions are not deductible, but distributions (including earnings) can be tax-free if certain circumstances exist.
Who is eligible to contribute to a Roth IRA?
To contribute to a Roth IRA, an individual (or an individual’s spouse) must have eligible compensation. Compensation for Roth IRAs is defined the same as for Traditional IRAs. In addition, a person’s modified adjusted gross income (MAGI) must fall within the applicable limits for her tax filing status. Unlike a Traditional IRA, there is no age limit for making contributions to a Roth IRA.
What are the contribution limits for a Roth IRA?
An eligible individual may contribute the lesser of the annual contribution limit ($7,000 for 2024 and for 2025), or 100 percent of eligible compensation (generally, earned income) to a Roth IRA. The maximum applies to all Traditional IRA and Roth IRA contributions made for the tax year, in aggregate. The contribution limit is subject to annual cost-of-living adjustments. Also, IRA owners who are age 50 and older may make catch-up contributions of up to $1,000 for 2024 and for 2025. What is the deadline for contributions to a Roth IRA? The contribution deadline is the taxpayer’s tax return due date (usually April 15), excluding extensions. But if the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRA owner has until the following business day to make her contribution.
What are Coverdell Education Savings Accounts?
A Coverdell education savings account (ESA) is a savings arrangement in which contributions are invested for the purpose of funding a person’s education. ESAs were created by the Taxpayer Relief Act of 1997 and became available January 1, 1998, as a way to help fund higher education. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) brought several changes to ESAs effective January 1, 2002, making ESAs more appealing. This included, among other things, increased contributions, increased eligibility for contributors, and the ability to use ESA assets for primary and secondary education.
What are the benefits of ESAs?
ESA contributions are not tax-deductible, but the earnings grow tax-deferred. ESAs provide a unique savings vehicle with the potential to have tax-free income to pay for education expenses. Tax-free distributions may be taken to pay for the person’s qualified education expenses at an eligible educational institution. Qualified education expenses can include certain elementary and secondary education expenses as well as postsecondary education expenses.
What is the annual contribution limit for ESAs?
The annual maximum contribution per designated beneficiary is $2,000. A person (or entity) may contribute to ESAs on behalf of any number of designated beneficiaries. Because there might be multiple persons contributing to an ESA on behalf of one designated beneficiary, there is potential for a designated beneficiary to receive excess contributions.
What is the ESA contribution deadline?
Contributors must make ESA contributions by their tax return due date, not including extensions (generally April 15). Contributions made between January 1 and the tax return due date for the previous year are called “prior-year contributions.” Contributors must make written irrevocable elections to treat contributions as prior-year contributions.