Understanding Share Certificates

Share Certificates

• The Share Certificate is a fixed-rate deposit account with funds locked for a specific term.
• This account pays higher interest than a Regular Share account.
• Available to Personal and Business members

General Information

• Terms range from 3 months to 5 years.
• Traditional Certificates have a minimum of $500 and add-ons are allowed at the discretion of management.
• Certificate dividends are paid monthly based on a daily balance.
• Monthly dividends can compound, be transferred to savings, or withdrawn without penalty.
• Account balances can secure a Certificate Secured Loan.
• Certificates automatically renew with the same term at the current interest rate, excluding specials.
• A grace period of 10 calendar days allows canceling or changing a maturing Share Certificate without penalty.
• Early withdrawal penalties apply for maturities.
• For terms of one year or less, the penalty is 90 days' dividends, whether earned or not.
• For terms of one to two years, the penalty is 180 days' dividends, whether earned or not.
• For terms greater than two years, the penalty is 365 days' dividends, whether earned or not.

Target Market

• Suited for members with large savings, Money Market accounts, Checking Accounts, those looking to refinance loans, or those with IRAs.

Benefits

• Fixed return and security with deposits insured up to $250,000 through NCUA.
• Monthly interest paid is available for withdrawal without a penalty
• Borrowing against the Share Certificate can avoid early withdrawal penalties.

Youth Certificate

• A Youth Certificate is essentially a fixed-rate deposit account for youth ages 0-17, where funds are locked in for a specific term.

General Information

• A special youth rate applies to a 1-year term.
• Youth Certificates have a minimum of $100, and add-ons are allowed at the discretion of management.
• Certificate dividends are paid monthly based on daily balance and can compound.
• Balances may be used to secure a Certificate Secured Loan.

Wealth Builder CD

• High yield CD for members utilizing the Wealth Builder Savings Account.

General Information

• Available only with funds from the Wealth Builder Share account.
• The Wealth Builder Share must be open for at least six months with maintained monthly deposits
• Minimum opening deposit of $500.
• 12-month term with automatic renewal unless the member chooses otherwise, add-ons allowed in in $500 increments with funds from the Wealth Builder Shares only
• Early withdrawal penalty of 90 days dividends, whether earned or not, is applied, with a minimum of $20.

Target Market

• Suited for members with a Wealth Builder Savings Account, Sky Checking Accounts,or IRA Accounts, and for those using Sky@Home, Mobile Banking & Telephone Teller services.

Traditional IRA Savings

• A Traditional Individual Retirement Account (IRA) is a savings account designed to save money for retirement, allowing tax-deferred growth.

General Information

• Dividend rates are paid monthly based on the average daily balance and tiered based on the balance the account.
• Contributions must have earned income during the year.
• No age limit for contributions as of 2020.
• Annual limits are set by the IRS, with "catch-up" limits for owners age 50 and over.
• A married person filing a joint tax return with less compensation than the annual limit may make larger contributions using the spousal contribution rule.
• Contributions are often tax-deductible.
• Federal and Montana State withholding is mandatory for distributions.
• Rollovers and Transfers move funds from one IRA to another

Target Market

• Suited for Retirement Focused members, working people with earned income, and those using Direct Deposit & Payroll Deduction or Sky@Home, Mobile Banking & Telephone Teller services.

Contribution Information:

• For 2020, individual contributions may be $6,000 or 100% of earned compensation, whichever is less.
• "Catch-Up" contributions allow IRA owners age 50 and older to contribute an additional $1,000 per year.

Distribution Information:

• An IRA owner may take a distribution at any time.
• Penalties for early withdrawal may apply if the member is under age 59½.
• Distributions become mandatory beginning in the year the IRA owner reaches 72.
• The IRA owner must begin taking RMD by April 1st following the year they attain age 72.

Rollover Information:

• An IRA Rollover involves withdrawing assets from an IRA and re-depositing them within 60 days into the same or another IRA of the same type.
• The 60-day rule requires the deposit to be made within 60 calendar days
• The Once-a-year rule restricts rolling over distributions from the same IRA within 365 days

Direct Rollover Information

• A Direct Rollover is asset movement directly from a Qualified Retirement Plan (QRP) to an IRA.
• In a Direct Rollover the owner never has access to the funds
• The 60-day and Once-a-year rules do not apply.

Roth IRA

• Roth Individual Retirement Account (IRA) is a saving account. Savings grow tax-free under certain circumstances.

General Information

• Dividends are paid monthly, tiered and based on average daily balance.
• Anyone with earned income, no age limits can contribute.
• IRS sets annual contribution limits and “catch-up” limits for those 50 and over.
• Limits may be affected by Modified Adjusted Gross Income (MAGI).
• Married persons filing jointly may be able to contribute more by using the spousal contribution rule.

Distributions

• Contributions can be withdrawn anytime with no tax consequences or penalties.
• Earnings can be withdrawn tax and penalty free if certain conditions are met like the 5 year test or meeting criteria such as death, disability, reaching age 59½ or first-time home purchase.
• Roth IRAs have no Required Minimum Distribution (RMD).

Roth IRA FastTrak Account

• A Roth IRA FastTrak is a systematic savings account with higher savings rates to help members reach long-term goals.

General Information

• Dividends paid monthly and based on the average daily balance in the account.
• Contribution and distribution rules are the same as other Roth IRA Savings accounts.
• The minimum opening deposit is $25.
• A minimum $25 automatic monthly deposit is required to avoid a $10 monthly fee.
• Monthly deposits can be made via direct deposit, payroll deduction, ACH deposit, or automatic transfer.
• Can make several smaller automatic deposits during the month but total must be at least $25
• Funds withdrawn before 6 months are penalized with a penalty of six month's dividends, whether earned or not, with a minimum of $25

Target Market

• Suited for Retirement Focused members and those who are individuals saving for home.

Coverdell Education Savings Account (ESA)

• Allows individuals to contribute to an account on behalf of a child, designated to help pay education expenses.

General Information

• Anyone can set up an account, but only a parent or legal guardian can be designated the "Responsible Individual" to transact business on it.
• The child cannot access the account unless designated the "Responsible Individual" upon turning 18.
• Dividends are paid monthly, tiered and based on the average daily balance.
• Contributions can be made until the child reaches age 18 (no age limit for special needs child).
• Annual limits are set by the IRS and may be affected by contributors' MAGI.
• Contributions are not tax-deductible.
• Withdrawals are tax and penalty-free if used for qualified education expenses as defined by the IRS.
• Funds must be withdrawn before the child reaches age 30.
• Funds can be rolled to another family member.

Simplified Employee Pension (SEP)

• A Traditional IRA retirement savings plan that small companies often offer to their employees.

General Information

• Dividend rates are calculated and paid monthly based on the average daily balance.
• There is no age limit and all who earned income can contribute.
• IRS sets annual limits based on income level.
• SEP contributions do not affect personal Traditional or Roth IRA contribution limits.
• Contributions may be tax deductible by the employer.
• Withdrawals are taxed similarly to Traditional IRA withdrawals.
• Combine advantages of qualified plans but remain simple to understand.

IRA Share Certificate

• A guaranteed, market driven, fixed or variable rate deposit account for a specific term.
• Member does not have access to the funds, and penalties apply to funds withdrawn prior to maturity.

General Information

• Rates are tiered based on the certificate amount and duration (term)
• The minimum balance is $500.
• Terms range from 1-year to 5-years.
• Certificate dividends are paid monthly based on daily balance
• It Automatically renews with the same term and the currently offered interest rate unless the member makes other arrangements.
• Grace period to cancel or change a maturing IRA certificate without penalty is 10 calendar days
• Early withdrawal penalty for maturities of: One year and less: 90 days dividends; whether earned or not One to two years: 180 days dividends; whether earned or not and Greater than two years: 365 days dividends; whether earned or not

IRA Comparison

• Contributions Traditional: Tax-deductible*
• Roth: Not deductible (Exceptions may apply) and Coverdell: Not deductible
• SEP: Employer Deductible
• Withdrawals Traditional: Taxable
• Roth: Contributions may be withdrawn at any time, penalty-free & tax-free
• Coverdell: Not taxable if used qualified education expenses
• Maximum annual contribution
  • Traditional: $6,000 individual; or $12,000 for married couples filing a joint federal tax return
  • Roth: $6,000 individual or $12,000 for married couples filing a joint federal tax return
  • Coverdell: $2,000 per child per year, until child reaches age 18
  • SEP: 25% of employee's compensation not to exceed $56,000
• Eligibility Traditional: Anyone (no age limit) with earned income
  • Roth: Anyone with earned income No age limits
  • Coverdell: Designated beneficiary must be under 18 (unless special needs)
• When may funds be withdrawn without penalty?
  • Traditional: Age 59, death or disability, first time home purchase, qualified education expense, and more
  • Roth: Tax & penalty free when after meeting the 5-year test and one of the following: age 59, death, disability or first home purchase
  • Coverdell: For qualified education expenses
• Ownership Traditional: Individual person Roth: Individual person Coverdell: Child is beneficiary (owner) and SEP: Individual Person
• Earnings Traditional: Tax deferred Roth: Tax-free upon meeting requirements Coverdell: Tax-free if used for qualified expense and SEP: Tax deferred
• Tax year deadline Traditional: April 15 of the following year Roth: April 15 of the following year Coverdell: April 15 of the following year and SEP: Business filing date