Investment/Retirement, Section 457, IRA FAQs
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Investments/Retirement FAQs
Q: What is a mutual fund?
A: A mutual fund is simply a collection of stocks, bonds or other securities owned by a group of investors and managed by a professional investment company. The managers of these funds diversify their holdings by buying a wide variety of investments within the stated fund category to reach an investment objective of Current Income, Future Growth, or a combination of Income and Growth. . Mutual funds allow investors to benefit from professional management and asset diversification, for which a fee is charged.
The advantage of buying a mutual fund as opposed to a single security is that you get instant diversification. This means that rather than “putting all your eggs in one basket”, by purchasing the stocks or bonds of just one company or entity, investing in a mutual fund allows you to instantly purchase the securities of many companies or entities at once.
Q: What is asset allocation?
A: How you have your funds, or assets, allocated will have a big impact on the potential risks and rewards of your investments. The study of asset allocation really refers to diversifying your investments, in other words not "putting all of your eggs in one basket."
Money market accounts, stocks, bonds and international investments respond differently to changing investment environments. By allocating your money among several investment categories - with different objectives, growth patterns and time frames - you may protect your money against temporary downturns in any one market. However, even proper asset allocation will not guarantee a profit or protect you from loss.
Q: How can I save on taxes by using investment products?
A: There are numerous investments that offer tax benefits. Here are just a few and the tax benefit they offer:
- Traditional IRAs may allow you to deduct your contribution on your current tax bill.
- A Roth IRA offers after tax contributions with access to your funds in the future with no income tax due.
Variable and Fixed annuities are an additional way to invest on a tax-deferred basis.
- Municipal bonds provide federally tax-free income, and some bonds are double tax-exempt, meaning that you pay no federal or state tax on their earnings. Some stock mutual funds specialize in minimizing taxes, because they concentrate on offsetting their gains with their losses, don't trade as frequently and attempt to make most capital gains long-term gains, which are taxed at a more favorable rate.
- Federal agencies offerings may be state tax-exempt as well.
For a comprehensive review of your personal tax situation, always consult with a tax advisor. Neither PrimeVest, nor any of its North Shore Bank representatives may give legal or tax advice.
Q: I have funds in a retirement plan at a former job. How do I roll it over?
A: Your current employer will provide you with a form that will allow you to roll over your retirement plan into a North Shore Bank IRA. Because Tax penalties can be assessed if not handled properly, we recommend that you check with North Shore Bank or your tax advisor before initiating this type of transaction. Learn More.
Please note: the investment products detailed above are NOT a deposit or other obligation of the bank or its affiliates; are NOT guaranteed by the bank or its affiliates; are NOT insured by the FDIC or any other agency of the United States; are subject to investment risk, including the possible loss of value.
Still have questions? We can help.
Section 457 FAQ’s
You may also want to check out North Shore Bank’s detailed Section 457 Plans.
Q: What is North Shore Bank's Section 457 Plan?
A: It’s a plan made possible by Internal Revenue Service (IRS) Code 457, which enables municipal employees to save money pre-tax (state and federal) for retirement through payroll deduction.
Q: Why should I participate in North Shore Bank's Section 457 Plan?
A: If you are a municipal employee or educator, a Section 457 Plan allows you to automatically put a portion of your income into a retirement account before it is taxed. This allows you to earn compound interest on a larger sum of money before you need to withdraw it. It is an easy and convenient way to save for retirement.
Q: How much can I invest in a North Shore Bank Section 457 Plan?
A: For Calendar year 2006, you can contribute any amount up to $15,000 per year. Participants over the age of 50 may also set aside an additional $5,000 per year. Also, a special "catch-up" provision permits participants within three years of retirement to shelter twice the normal permitted maximum amount. You may take distributions upon your retirement and elect to receive your funds as monthly, quarterly or annual payments; you may also elect to receive a lump sum distribution.
Q: Who is eligible to participate in North Shore Bank's Section 457 Plan?
A: Municipal employees and teachers whose employer has North Shore Bank as their section 457 plan provider may participate.
Q: Can I have an IRA in addition to a section 457 plan?
A: Yes. As long as you qualify under the IRA contribution rules, you may contribute to a Roth or traditional IRA in addition to a Section 457 plan.
Q: What costs will I incur for participating in North Shore Bank's Section 457 plan?
A: All Section 457 plans include fees of some form. However, we are pleased to tell you the fees associated with our Section 457 Plan are among the lowest in the industry. FDIC-insured fixed-rate certificate options are provided without any administrative fee. Mutual fund options carry a small asset fee, which ranges from 0.2% for Diversified Funds to 0.5% for Nicholas Fund investments.
Those looking for a long-term savings program will be pleased to learn that the administrative fee for Nicholas Fund investments is only assessed on the first $80,000 of investments. This exclusive provision of our plan significantly adds to the long-term rewards of saving with North Shore Bank.
Q: How are distributions from my North Shore Bank Section 457 plan paid to me when I retire?
A: You can elect to receive your funds as monthly, quarterly or annual payments, or can choose to receive a lump sum distribution. North Shore Bank will assist you in structuring the repayments to meet your individual needs and goals.
Q: What sets North Shore Bank apart from other Section 457 Plan providers?
A: At, North Shore Bank our personal service and experience set us apart from other Section 457 Plan providers. In fact, we’ve been helping customers manage Section 457 Plans for over 25 years. What’s more, our Section 457 Plan Specialists are available to meet with you in a location and at a time most convenient and comfortable for you - even in your home.
Still have questions? We can help.
IRA FAQ’s
Q: How much can I contribute to a traditional IRA?
A: View contributions for a Traditional IRA.
Q: When may I use my IRA assets?
A: You may use the funds you contribute to your IRA at any time. However, if you are younger than 591/2, the IRS imposes a 10% early distribution penalty on the funds withdrawn unless you qualify for an exception. Exceptions include withdrawals for the following reasons:
- Disability
- Qualifying medical expenses
- Qualifying education expenses
- Qualifying first-home purchase ($10,000 lifetime limit)
- Death
- Receipt of assets in equal payments over your life expectancy
- IRS levy distribution
Please contact your tax advisor for further information.
Q: Am I ever required to take funds from my traditional IRA?
A: Yes. Your first distribution must be taken for the year in which you reach the age of 70½. This first distribution, and only this first distribution, can be delayed until the year following the year you reach age 70½; however, it must be taken by April 1. If you choose this distribution option, you must take another distribution by year's end - one for the year you turned 70½ and one for the current year.
Q: What makes the Roth IRA different from the traditional IRA?
A: Roth IRA is different from a traditional IRA in two ways:
1) The money you contribute to a Roth is never deductible for tax purposes. Because it has already been taxed, the principal amount is never subject to taxes or IRS penalties.
2) Not only does the money you contribute to a Roth IRA grow tax-deferred, if you do not withdraw earnings from the IRA for at least five years and you have reached age of 59½, those earnings become tax-free.
Q: How much can I contribute to a Roth IRA?
A: View contribution limits for Roth IRA’s.
Q: Can I move funds from my traditional IRA into a Roth IRA? What rules apply?
A: Yes, as long as you fall within certain guidelines and follow these specific rules:
- Your modified adjusted gross income (MAGI) must be $100,000 or less.
- If married, you must file a joint income-tax return.
- You must pay taxes on the funds for the year they were converted.
- You must complete the conversion within 60 days.
Because Tax penalties can be assessed if not handled properly, we recommend that you check with a North Shore Bank Investment Advisor or your tax advisor before initiating this type of transaction.
Q: Am I ever required to take funds from my Roth IRA?
A: No. Unlike with traditional IRAs, which require distributions to begin at age 70½, your earnings can continue to grow in a Roth IRA until you need them.
Q: Can I make a contribution to both my traditional and Roth IRA accounts for the same year?
A: Yes, as long as you follow IRS guidelines and your total contribution to both IRA types does not exceed 100% of earned income up to contribution limit. Learn more.
Still have questions? We can help.
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- Call us at 877.672.2265.
(8:30 am until 7:00 pm CST, Monday through Friday, 9:00 am until 5:00 pm CST, Saturdays, & 10:00 am until 3:00pm CST, Sundays)
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