Individual Retirement Accounts (IRAs) were created to encourage individuals to save for retirement by offering different tax benefits depending on the type of IRA utilized. Sterling Trust Company offers various types of IRAs including the Traditional, Roth, SEP and SIMPLE. All accounts are self-directed by the account holder or the account holder's designated representative. Within a Sterling Trust IRA, individuals may hold traditional investments such as public mutual funds, stocks, bonds, annuities, limited partnerships and bank CDs. In addition, private placement investments and non-standard assets such as real estate, stock of closely held companies, promissory notes, trust deeds, private limited partnerships and limited liability companies and other types of private investments may be purchased, transferred, or rolled into a Sterling Trust self-directed IRA.
Traditional IRAs - The first type of IRA created was the Traditional IRA. Annual contributions to a Traditional IRA may be tax deductible depending on the individuals Modified Adjusted Gross Income (MAGI) and whether or not the individual and his/her spouse are covered by an employer's retirement plan. Earnings accumulate on both principal and interest paid and federal income taxes are deferred up to the point the individual withdraws funds or assets from the IRA.
See IRS Publication 590* for more information.)
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Roth IRAs - Roth IRAs were created by the Taxpayer Relief Act of 1997 to offer individuals an alternative retirement vehicle with different tax benefits than provided by Traditional IRAs. Depending on an individual's Adjusted Gross Income, contributions can be made (even past age 70½) to a Roth IRA but are considered non-deductible. However, earnings may be withdrawn tax-free and even penalty-free when certain conditions are met. Contributions to a Traditional IRA may be converted to a Roth IRA if the individual's AGI is less than $100,000. See IRS Publication 590* for more information.
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Simplified Employee Pension (SEP-IRA) - The SEP-IRA was created to provide employers with a simplified way to make contributions to their employees' retirement income. For 2008, SEP rules permit employers to make an annual contribution of up to 25% of the employee's compensation or $46,000, whichever is less (based on the maximum compensation limit of $230,000). In addition, for 2008, the employee may make an annual IRA contribution of up to $5,000 (or 100% of compensation, whichever is smaller) to the same IRA account. For individuals that are age 50 or over, a catch-up contribution of $1,000 may be made. It should be noted that annual IRA and catch-up contributions may or may not be deductible if the participant is covered by an employer retirement plan. See IRS Publication 590* or IRS Publication 560* for more information.
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Savings Incentive Match Plan for Employees (SIMPLE IRA) - The SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. It was created for businesses having fewer than 100 employees as a simplified and cost effective way for employers and employees to make contributions to provide retirement income. An employee may defer a portion of his/her income to the SIMPLE IRA, and the employer has the option to make a matching contribution. There are specific deadlines and requirements for employers to adopt a SIMPLE IRA plan. See IRS Publication 590* or IRS Publication 560* for more information.
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