There are two main types of IRAs – traditional IRAs and Roth IRAs.

Most people saving for retirement can contribute to a traditional IRA. And, if you meet certain requirements, your contributions are tax deductible. Whether your contributions are deductible or not, your earnings accumulate tax deferred, so you won’t owe income taxes until you make withdrawals. Deductible contributions and earnings are taxed at your regular income tax rate as you withdraw them.

With a Roth IRA, contributions aren’t tax deductible when you make them. But in favorable contrast to a traditional IRA, earnings are free from income tax upon withdrawal if you meet the specified conditions. A Roth IRA also has more flexible early withdrawal rules than a traditional IRA, and you aren’t required to begin withdrawals at age 70 ½.

Determining which type of IRA account is right for you largely depends on several factors including:

• Your age at the time you’re contributing
• Your tax rates when contributing and during retirement
• Your plans for needing this money prior to age 59 ½
• Your plans for leaving this money to heirs
• Your likelihood of actually setting aside the money you save in taxes and investing it in another account for retirement.

For more information about IRA eligibility rules and help determining which IRA is best for you, contact Chad A. Eyre or Steve M. Benzing, the MEMBERS Financial Services Representatives serving the members of Dow Chemical Employees’ Credit Union, at (989) 835-7794 or (800) 835-7794 extension 4572.

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