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Individual Retirement Accounts (IRAs)

We want you to focus on your work and eventual retirement. Let the trust department at The Bank of Missouri administer your Individual Retirement Account (IRA).

An individual retirement account (IRA) is a personal savings plan that offers specific tax incentives to encourage you to save for retirement. Currently, there are two types of retirement IRAs. Traditional IRAs allow for tax-deductible contributions under certain conditions. Roth IRAs (created by the Taxpayer Relief Act of 1997) are funded with after-tax dollars, but may allow for tax-free withdrawals under certain conditions.

It is important to realize that an IRA is not itself an investment, but a tax-advantaged vehicle in which you can hold some of your investments. You need to decide how to invest your IRA dollars based on your own tolerance for risk and investment philosophy. How fast your IRA dollars grow is largely a function of the investments that you choose.

Tip: The term "IRA" can refer either to an individual retirement account or an individual retirement annuity. An individual retirement annuity is an annuity or endowment contract that you purchase from a life insurance company. The contract must not be transferable, and the premiums must be flexible so that if your compensation changes, your premium payments can also change. In general, the same rules that apply to individual retirement accounts also apply to individual retirement annuities.
Caution: Special rules apply if you inherit an IRA.

Below is an overview of IRA types or you can contact one of our financial advisors for help with choosing an IRA that's right for you.

Traditional IRAs


A traditional individual retirement account or individual retirement annuity (IRA) is a personal savings plan that offers tax benefits to encourage retirement savings. Generally, for 2016, if you haven't reached age 70 1/2 by the end of the tax year, you can contribute up to $5,500 a year to a traditional IRA if you have at least that much in taxable compensation for the year. In addition, individuals age 50 and older can make an extra "catch-up" contribution of $1,000 in 2016. Investment earnings in a traditional IRA grow tax deferred, but distributions will be subject to federal and possibly state income tax (excluding the portion that represents nondeductible contributions).

Roth IRAs


The Roth IRA is another type of personal savings plan that offers tax benefits to encourage retirement savings. The same contribution limits that apply to traditional IRAs also apply to Roth IRAs. With a Roth IRA, however, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.   

401(k) Rollovers


A rollover is generally a transfer of assets from a retirement plan maintained by your former employer (it may be possible to roll over certain in-service distributions from an existing employer's profit-sharing plan as well). Rollovers from an employer-sponsored retirement plan can take one of four forms:

  1. A transfer from your old retirement plan directly to an IRA trustee (this is a type of direct rollover)
  2. A transfer from your old retirement plan to you, and then, within 60 days, from you to an IRA trustee (this is a type of indirect rollover)
  3. A transfer from your old retirement plan directly to the trustee of the retirement plan at a new employer (this is a type of direct rollover)
  4. A transfer from your old retirement plan to you, and then from you to the trustee of a retirement plan at a new employer (this is a type of indirect rollover)

Generally, rollovers come from defined contribution plans. A defined contribution plan is a retirement plan in which contributions are based on a set formula (e.g., a percentage of the employee's pretax compensation), while the payout is based on total contributions and investment performance. The 401(k) plan is the most common type of defined contribution plan.

If a rollover is done properly and all rules are followed, there will be no taxes or penalties imposed on the retirement plan distribution. In addition, a rollover encourages retirement savings by allowing you to continue tax-deferred growth of the funds in the IRA or new plan. When you are eligible for a rollover from your plan, the plan administrator must send you a timely notice explaining your options, the rollover rules, and related tax issues.



Since the introduction of SEP and SIMPLE plans, owners of small and new businesses have many ways to help employees save for retirement.

  • All company contributions are immediately 100% vested and available to the participants.
  • Part-time employees may not be excluded.
  • Company contributions are tax-deductible for the employer and neither contributions nor earnings are taxed to participants until distributed.
  • Withdrawals from a SIMPLE-IRA are subject to ordinary income tax and may be subject to a federal 10% penalty if taken before age 59 ½. The federal penalty is 25% if withdrawals are taken during the first two years of plan membership.

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