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Personal Individual Retirement Accounts

An IRA is a great way to save for the future.

IRAs have two special features:

  • Pre tax contributions – funds you deposit into IRAs are tax deferred, that is you don’t include the amounts in your current income for tax purposes. When you withdraw the funds later in life, you pay taxes on the money at that time. This is an advantage because usually after retirement you will be in a lower tax bracket. The amount you can contribute is limited, based on your tax filing status and income.

  • Compounding interest – there is no limit to the rate of interest you can earn on your IRA funds. And, since the funds will be on deposit for many years, the interest paid will also earn interest in the future. This compounding greatly increases the interest your deposited funds earn over time. Again, all the interest you earn is tax free until you begin making withdrawals, usually at a lower tax rate.

Yearly Fee

All of the above features are included in the low yearly fee of $30.00. We will waive the fee each year you maintain a minimum balance of just $25,000.00 in your account.

Account Comparison

Personal IRAMinimum DepositInterest RateAPY*
1 Year $2,500.000.85% 0.85%
2 Years $2,500.000.90% 0.90%
3 Years $2,500.000.95% 0.95%
5 Years $2,500.000.97% 0.97%

* Annual Percentage Yield (APY) is accurate as of 07/28/2015. Rates on CDs are fixed for the term of the CD at the time of opening. For all other interest bearing accounts, the interest rate may change after account is opened. Rates offered are subject to change at any time without prior notice. Fees and early withdrawal penalties could reduce earnings on the account. See Product Information for other terms and conditions.

Two types of IRAs have been established by Congress:

Traditional IRA – Persons who are under age 70½ and have earned income are eligible to make contributions to a Traditional IRA, regardless of your income level.

  • You may contribute up to 100% of earned income, but no more than $5,500, $6,500 if you're over age 50, per year.

  • Working spouses may also contribute up to a maximum of $5,500 ($6,500 if the spouse is over age 50) on behalf of a non-working spouse.

  • Since these funds are supposed to be set aside for retirement, you can generally start making penalty-free withdrawals from a Traditional IRA at age 59½. Prior to that age, the IRS may charge you a 10% early withdrawal penalty on money you take out. This IRS penalty is in addition to any early withdrawal penalty that may be imposed by Pacific Mercantile Bank.

  • There are many exceptions to the IRS penalty, including withdrawals for first time home purchase ($10,000 lifetime limit), qualified higher education expenses, death, or disability. A full list of penalty exceptions is available in IRS Publication 590.

  • The IRS also requires that you begin taking money out of your traditional IRA when you turn age 70½. Required withdrawals are determined by a special formula.

Roth IRA – contributions to a Roth IRA are made in after-tax dollars, meaning you've already paid taxes on the funds. The money also grows tax-deferred, and if you meet certain requirements, you get to take the money out at retirement income tax-free. A Roth IRA can be a powerful tool to build wealth for your estate and give the benefit of tax-free income to your heirs too.

  • You can contribute up to $5,500 ($6,500 if you're over age 50).

  • Working spouses may also contribute up to $5,500 ($6,500 if the spouse is over age 50) on behalf of a non-working spouse.

  • An additional advantage is that you can even make contributions after reaching age 70½ up to the amount of your earned income for the year. You are not required to start taking distributions at age 70½. Contributions to a Roth IRA are limited by your Modified Adjusted Gross Income.

  • You can withdraw any contributions to a Roth IRA tax-free at any time, regardless of your age or how long you've had the account. This is because you have already paid taxes the year the contribution was made. However, if your funds are in a Pacific Mercantile Bank CD that has not yet matured, an early withdrawal penalty may apply.

  • You may begin making tax-free, IRS penalty-free withdrawal of earnings when your Roth IRA has been established for at least five years, and you're at least 59½ years old, for a first time home purchase ($10,000 lifetime limit), or in the event of disability or death. If you've had the IRA for less than five years, you can also make withdrawals in these cases penalty-free, but the earnings are taxable.

  • Withdrawal amounts of earnings for the cost of education expenses for you, your spouse, child, or grandchild, avoid the 10% penalty but will be taxed as ordinary income.

Very Important Information:

IRAs can be very helpful tools for helping you reach the income goals you have set for your retirement years. Talk to your tax and financial advisors to see which kind of IRA might be the best for you, and start taking advantage of the opportunity to save for retirement with an IRA.

This information is a summary of the main features of IRAs. There is much more information required to be considered that may be unique to your particular financial position and goals. You must seek advise from a tax professional who will consider all issues in helping you decide which IRA, if any, is right for you. You will need to evaluate the merits and risks associated with relying on any information provided. Even though this information provided is relating to investing strategies, Pacific Mercantile Bank is not providing investment advise or recommendations. The information provided is based on our understanding of IRS publications. However, accuracy, completeness, or reliability cannot be guaranteed. Please understand that Pacific Mercantile Bank and its affiliates make no warranties and do not have any liability for your use of this information, nor is it intended to be construed as legal, tax, or investment advice, or a legal opinion.


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