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The main difference between Traditional and Roth IRAs, both of which are tax-advantaged retirement savings tools, is how these accounts are treated by the tax code.

A Traditional IRA from USSFCU may accept contributions of pre-tax or after-tax dollars and the dividends grow tax-deferred. When you make withdrawals after age 59½, they are treated as current income. In addition, contributions are potentially tax deductible depending on your filing status and income.

A Roth IRA from USSFCU is funded only with after-tax income. Therefore, contributory funds may be withdrawn at any time without tax penalties. When members make qualified withdrawals from their Roth IRAs after age 59½, earnings are not taxed.

Aside from these fundamental differences, Roth IRAs and Traditional IRAs also differ in a few other ways, which are described below.

Traditional IRAs

• Anyone with earned income may open a Traditional IRA
• Contributions are deductible from state and federal tax^*
• Earnings are tax deferred until withdrawal
• Withdrawals may begin at age 59½ and are mandatory at age 73 when members are often in a lower tax bracket
• Early withdrawals are subject to penalty**

Roth IRAs

• No age limits for eligibility
• Eligibility is subject to income limits based on filing status
• Contributions are NOT tax deductible
• No penalty for early withdrawal of contributory funds
• Early withdrawals on earnings subject to penalty²
• Earnings are 100% tax free on qualified distributions
• No mandatory distribution age

APY = Annual Percentage Yield. The APY assumes dividends will remain on deposit until maturity. The dividend period on your account begins from the date that your account is opened and ends on the maturity date unless renewed. The minimum balance required to open a share certificate is $1,000. You will earn dividends for every day during the period that your account equals or exceeds the minimum daily balance requirement. Early withdrawal penalties may apply. Changes without penalty are allowed ten days from the maturity date. Fees may reduce earnings. See Fee Schedule at ussfcu.org/fees for more details.

*Subject to some minimal conditions. Consult a tax advisor.

**Certain exceptions apply, such as qualifying higher education expenses, first time home purchases, etc.

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The Traditional and Roth Contribution Limit for 2024:

Total contributions to all of an individual’s Traditional and Roth IRAs may not be more than:

• $7,000 ($8,000 if you're age 50 or older),
• Or your taxable compensation for the year, if your compensation is less than this dollar limit.
• You may begin making 2024 contributions January 1, 2024

Deposits at all federal credit unions and the vast majority of state-chartered credit unions are covered by National Credit Union Share Insurance Fund (NCUSIF) protection. Not one penny of insured savings has ever been lost by a member of a federally insured credit union.

Federally insured credit unions offer a safe place for you to save your money, with deposits insured up to at least $250,000 per individual depositor. The National Credit Union Administration (NCUA) is the independent agency that administers the NCUSIF. Like the FDIC's Deposit Insurance Fund, the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government. 

For questions about the NCUA’s share insurance coverage, call 1.800.755.1030, option 1, Monday through Friday, 8 a.m. to 5 p.m. Eastern, or send an email to [email protected]. This toolkit contains a variety of helpful resources for credit unions regarding the Share Insurance Fund.

Share Insurance Toolkit from MyCreditUnion.gov

The toolkit has great resources like estimators, publications, videos and more.

Share Insurance Toolkit