Traditional IRA Annuity

What is a Traditional IRA?

A Traditional IRA is a special savings plan authorized by the federal government to help you accumulate funds for retirement. The advantage of a Traditional IRA is that contributions are generally tax deductible. Whether your contribution is deductible depends on certain factors, such as participation in an employer sponsored plan; filing status; and your modified adjusted gross income.

Who can contribute to a Traditional IRA?

If you receive compensation for personal services (wages, salary, commissions, tips, etc.), you may contribute to a Traditional IRA.

How much may I contribute?

The maximum contribution amount is the lesser of your compensation or $5,500 ($6,500 if you are age 50 or older). Contribution may not be made for or after the year in which you reach age 70½. You can make contributions to your Traditional IRA anytime up to and including the due date of your federal tax return for the previous year, namely, April 15.

Is my contribution deductible?

Whether your contribution is deductible depends on certain factors:

  • If neither you nor your spouse is an active participant in an employer-sponsored retirement plan, you can deduct 100% of your contribution, regardless of your income level.
  • If only your spouse is an active participant in such a plan and you file jointly, your deduction is phased out if your modified adjusted gross income (MAGI) is more than $181,000 but less than $191,000. If your MAGI is $191,000 or more, your contribution is non-deductible.
  • If you are an active participant in such a plan, your contribution may be fully or partially deductible, depending on your income level listed below.
If your filing status (2014) is … And your modified adjusted gross income is … The amount deductible is …
Single or head of household $60,000 or less A full deduction
More than $60,000 but less than $70,000 A partial deduction
$70,000 or more No deduction
Married filing jointly or qualifying widow(er) $96,000 or less A full deduction
More than $96,000 but less than $116,000 A partial deduction
$116,000 or more No deduction

If you are unsure whether you are an active participant in such a plan, your W-2 form will indicate your participation status. If you need to know sooner, ask your employer. All of the interest earnings accumulated in your Traditional IRA remains tax-deferred until withdrawn.

When can funds be withdrawn?

Withdrawals are permitted any time after age 59½ without an IRS tax penalty, but must begin by April 1 following the year in which you reach age 70½. When you begin making withdrawals, you will be taxed only on the amount you withdraw each year on which taxes have not previously been paid. The remaining funds continue to accumulate tax-deferred. You will benefit at retirement, in all probability, by the fact that you will be in a lower tax bracket than at the time you make your contribution. Additional IRS penalty-free withdrawals of contributions and earnings prior to age 59½ include:

  • Up to $10,000 (lifetime total) toward a qualified first-time home purchase for you, your spouse, your children or grandchildren;
  • Qualified higher education expenses for you, your spouse, your children or grandchildren (may include tuition, fees, books, supplies and equipment; no fixed dollar amount);
  • Payment of major medical expenses (exceeding 7.5% of your AGI);
  • Payment of health insurance premiums by certain unemployed individuals;
  • Death or disability of the IRA owner;
  • Distribution by way of certain substantially equal periodic payments.

There is a UTUIA surrender charge of 5% for the first through third policy years, decreasing 1% per year through the seventh policy year. After seven years, 100% of the annuity value can be withdrawn without a UTUIA surrender charge. In addition, after the first policy year, 10% of the annuity value may be withdrawn once per policy year without a UTUIA surrender charge.

Am I required to take a distribution?

Yes. You must begin to withdrawal funds starting at age 70½. The first required distribution must begin by April 1 following the year in which you reach age 70½.
Note: All references in this brochure to tax deduction and taxation of benefits refer only to the federal income tax law. Check state law for the impact of IRA contributions on state income taxes.  Contact your Field Supervisor or Karen Lasby  for more information.