IRAs

Individual Retirement Accounts (IRAs) let you augment your pension and Social Security income while potentially enjoying a break on your taxes. You can reduce your current tax bill by deferring income tax on the dividends the account earns until you begin withdrawals, usually after retirement, when your tax rate may be lower. Part or all of the money you deposit may be tax-deductible, depending on the IRA type, your overall income, and pension plan participation status.

Austin Telco Federal Credit Union offers a wide variety of accounts for IRA savings available as either Traditional or Roth IRAs. Choose from an IRA Share Account or get any of several types of IRA Certificates or invest in a combination of accounts. Certificates range in terms as short as 6 months or as long as 5 years.

You should seek the advice of your own tax advisor with respect to your own circumstances.

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IRA Deposit Accounts

IRA Share Accounts

• Similar to a share savings account in that any additions to the principal can be made at any time, up to the maximum contribution allowed per year, by law.
• No penalties from the Credit Union for early withdrawal. However, the Internal Revenue Service imposes penalties for withdrawals prior to age 59½.

IRA Share Certificates

• 6 mo., 18 mo., 1-, 2-, 3-, 4-, and 5-year certificates are available.
• Minimum deposit of $1,000 is required.
• Dividend rates based on term of certificate.

Jumbo IRA Certificates

• 6 mo., 18 mo., 1-, 2-, 3-, 4-, and 5-year certificates are available.
• A minimum deposit of $95,000 is required for Jumbo Certificates.
• Dividend rates based on term of certificate.

Super Jumbo IRA Certificates

• 6 mo., 18 mo., 1-, 2-, 3-, 4-, and 5-year certificates are available.
• A minimum deposit of $225,000 is required for Super Jumbo Certificates.
• Dividend rates based on term of certificate.

2026 Traditional & Roth IRA Regular/Spousal Contribution Limits
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2025 Traditional & Roth IRA Regular/Spousal Contribution Limits
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IRA Deduction Limits

• You may be able to claim a deduction on your individual federal income tax return for the amount you contributed to your Traditional IRA. Please consult a CPA or tax advisor.
• Roth IRA Contributions are not deductible, but earnings grow tax-free when qualifications are met.

The following links show the income range in which your deduction may be disallowed if you or your spouse participate in a retirement plan at work:

• IRA Deduction if You ARE Covered by a Retirement Plan at Work
• IRA Deduction if You Are NOT Covered by a Retirement Plan at Work (deduction is limited only if your spouse IS covered by a retirement plan)

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Traditional IRAs

Benefits

• IRS penalty-free withdrawals are allowed prior to age 59½ when the funds are used for first-time home purchases (up to a lifetime limit of $10,000) and/or higher education expenses.
• Tax-deferred growth.
• Contributions may be tax-deductible.
• No contribution age restriction, even after age 73.
• Easy set up.

Traditional IRA Distributions

Any deductible contributions or earnings that are distributed from your traditional IRA are taxable. Qualified distributions can be taken at age 59½. If you are under age 59 ½ you may have to pay an additional 10% penalty tax for early withdrawals unless you qualify for an exception.

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Roth IRA

Benefits

• Qualified tax-free withdrawals.
• Earnings grow tax-free.
• No mandatory withdrawal at age 73.
• No contribution age restriction.
• Easy set up.

Roth IRA Distributions

If you receive a non-qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs.

A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements:

1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
2. The payment or distribution is:
   a. Made on or after the date you reach age 59½,
   b. Made because you are disabled,
   c. Made to a beneficiary or to your estate after your death, or
   d. Made for first-time home purchase (up to a $10,000 lifetime limit) and/or higher education expenses.

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Additional Information on IRA Distributions

Taxable Distributions

Most retirement plan distributions are subject to income tax and may be subject to an additional 10% tax.

Generally, the amount an individual withdraws from an IRA or retirement plan before reaching age 59½ is called an "early" or "premature" distribution. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions unless an exception applies.

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Required Minimum Distribution (RMDs)

You cannot keep retirement funds in your account indefinitely. You generally must start taking withdrawals from your IRA or retirement plan account when you reach age 73. Roth IRAs do not require withdrawals until after the death of the owner.

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Beneficiaries

A beneficiary can be any person or entity the owner chooses to receive the benefits of a retirement account or an IRA after the owner dies. Beneficiaries of a retirement account or traditional IRA must include in their gross income any taxable distributions they receive.

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Traditional and Roth IRA Comparison Chart

Traditional and Roth IRAs allow you to save money for retirement. This chart highlights some of their similarities and differences.

*You should seek the advice of your own tax advisor with respect to your particular circumstances.

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Health Savings Account

A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA.

HSA Deposit Accounts

HSA Share Accounts

• Like a share savings and/or checking account, in that any additions to the principal can be made at any time, up to the maximum contribution allowed per year, by law.
• HSA Checking accounts allow authorized users, checks, and instant-issue debit cards.
• No penalties from the Credit Union for early withdrawal. However, see Distributions from an HSA section above for possible tax consequences.

Benefits

• You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA, even if you do not itemize your deductions on Form 1040.
• Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
• The contributions remain in your account until you use them.
• The interest or other earnings on the assets in the account are tax-free.
• Distributions may be tax-free if you pay qualified medical expenses.
• An HSA is "portable." It stays with you if you change employers or leave the workforce.

Qualifying for an HSA

To be an eligible individual and qualify for an HSA, you must meet the following requirements:

• You must be covered under a high deductible health plan (HDHP) on the first day of the month.
  
  • An HDHP has a higher annual deductible than typical health plans and a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.
• You have no other medical health coverage.
• You are not enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's tax return.
• Last-month rule. Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month.

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2026 HSA Minimum deductible amount:

• $1,700 for self-only coverage ($50 increase from 2025)
• ‍$3,400 for family coverage ($100increase from 2025)
• $3,400 for embedded individual deductible ($100 increase from 2025)

Contribution to an HSA

Any eligible individual can contribute to an HSA. For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Family members or any other person may also make contributions on behalf of an eligible individual.

Contributions of stock or property are not allowed.

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2026 HSA Contribution Limits

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2025 HSA Contribution Limits

Distributions from an HSA

You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your HSA to send you a distribution from your HSA.

You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. You do not have to make distributions from your HSA each year.

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Coverdell Education Savings Account

A Coverdell Education Savings Account (Coverdell ESA) is a trust or custodial account set up solely for paying qualified education expenses for the designated beneficiary of the account. There are certain requirements to set up a Coverdell ESA:

• When you establish the account, the designated beneficiary must be under the age of 18 or be a special needs beneficiary.
• You must designate the account as a Coverdell ESA when you create it.

You may be able to contribute to a Coverdell ESA to finance the beneficiary's qualified education expenses. Contributions must be made in cash, and they are not deductible. Any individual whose modified adjusted gross income is under the limit set for a given tax year can make contributions. Organizations, such as corporations and trusts can also contribute regardless of their adjusted gross income. Contributors must contribute by the due date of their tax return (not including extensions). There is no limit to the number of accounts that can be established for a particular beneficiary; however, the total contribution to all accounts on behalf of a beneficiary in any year cannot exceed $2,000.00.

In general, the designated beneficiary of a Coverdell ESA can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions does not exceed the beneficiary's qualified education expenses. If a distribution exceeds the beneficiary's qualified education expenses, a portion of the earnings is taxable. Amounts remaining in the account must be distributed when the designated beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Certain transfers to members of the beneficiary's family are permitted.