Building the Foundation to Financial Success
Plan for Life’s Financial Milestones.
Whether you’re investing for retirement or education, we offer financial plans to help you achieve the financial security you deserve. Visit your local Northwest Bank office to learn more about getting started with a retirement or college savings plan.
Individual Retirement Accounts
Retirement planning is a cornerstone of any long-term financial plan. An Individual Retirement Account (IRA) can be a key part of your retirement plan as it offers significant tax advantages over the years that can provide you with more money during retirement—and perhaps even enable you to retire sooner than expected.
Roth and traditional IRAs are the two most popular types of these retirement accounts. See the chart below for details about each. We can help you determine the best fit for your needs.
• No taxes on withdrawals of contributions
• Earnings grow tax-deferred
• No required minimum distributions (RDMs) for as long as you live
• No age limit to open the IRA or contribute to it
• May be better if you expect to be in a higher tax bracket when you retire
• Eligibility and contribution amounts are limited by income level
• Contributions can’t be deducted from your taxes
• Contributions may be tax-deductible in the year you make them
• Earnings grow tax-deferred
• Eligibility not limited by income
• No contributions allowed after age 70½
• Required minimum distributions (RDMs) must start at age 72
• A portion of your withdrawals may be taxable
College Savings Programs
College is more expensive than ever. The average cost for tuition and fees at four-year public institutions has increased over 50% during the last 10 years. Without proper planning, your child could be burdened with loans. Help give your child a jump-start on their life by starting a college savings plan.
A 529 plan is a tax-advantaged savings plan sponsored by states, state agencies, and education institutions. This plan can help you save for your child’s education—or even lock in current tuition rates—for when your child is ready to attend college.
There are two types of 529 plans:
Savings Plans: This is the most common type. It works much like a 401K or IRA. You invest your contributions into mutual funds or similar investments. The value of this plan is based on the performance of what you’ve selected.
Prepaid Plans: This plan can be a great hedge against the skyrocketing costs of college tuition. You pre-purchase your child’s tuition based on today's rates. The Prepaid Plan pays out at the actual cost of tuition when your child enrolls in college. The plan is convertible for both private and out-of-state colleges.
529 Plan Advantages
- 529 Plans grow tax free, so you pay no federal tax on your earnings. You can also take generous gift tax incentives and state tax deductions for contributing in some states. Plus, anyone can contribute to the plan.
- Money grows faster than with a savings account, and you have complete control of your assets.
- You can change the beneficiary to another eligible family member if the original beneficiary is awarded a full scholarship or decides not to go to college. Funds can even be used for a parent who wants to go back to school.
- Your child can attend just about any school in any state no matter which state the 529 plan was established in.
529 Plan Drawbacks
- You must use it for college or vocational schools. Withdrawing money for any other reason means paying a 10% penalty on the earnings.
- Like an IRA, money in your 529 Plan is only as safe as the investments you choose. Earnings and principal can be lost if the market fluctuates. A more conservative allocation can help reduce this risk as your child nears college age.
- You'll have to pay management fees with a 529 plan. However, even with the added expense of paying fees of 0.50 to 1 percent, your funds will likely grow much faster than if it was left in a savings account.
Need help deciding which 529 plan is best for you? Sit down with our advisors—we can help you compare the different plans and develop a strategy that meets your savings goals for college.
Advanced Financial Planning
If you’re looking for guidance regarding topics such as estate planning, legacy planning, charitable giving, or other gifting strategies, please visit our Preserve page.
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Northwest Bank and its operating units do not guarantee the performance of any investment or insurance products. Material provided is meant to educate and not provide legal, tax, accounting or investment advice. Material does not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized or unlawful to do so.
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