Flexible saving options for you and your spouse.
A MERS IRA is a great way to build retirement security through tax-advantaged saving, with flexible withdrawals that can help you reach your other financial goals at the same time.
With a MERS IRA you can:
- Benefit from tax-free growth or tax-deductible contributions
- Generate income in retirement
- Pay for education expenses for you, your spouse, your child or grandchild
- Make a down payment on your first home
- Leave an inheritance for your loved ones
Who is eligible?
To be eligible to open a MERS IRA, you must be a current or former employee of a Michigan municipality. You do not have to have participated in a MERS retirement plan or MERS 457 program directly.
The spouse of an eligible IRA owner is also eligible to open and contribute to a MERS IRA if they file a joint tax return. The eligible employee must have established a MERS IRA for themselves in order for their spouse to open one, but the employee's account does not have to be funded.
Roth vs. Traditional IRAs
MERS offers two types of IRAs:
- A Roth IRA provides tax-free income in retirement
- A Traditional IRA allows tax-deductible contributions now
Both will allow you to withdraw your money at any time without penalty for qualified expenses.
These can include:
Education expenses for you, your spouse, your child or grandchild
Buying or building your first home (up to $10,000)
Some medical expenses
However, there are some key differences between Roth and Traditional IRAs. Understanding those differences can help you determine which type is right for you.
| ||Roth ||Traditional |
|Tax Advantages ||Contributions are made post-tax; qualified withdrawals provide tax-free income. ||All or a portion of contributions may be tax-deductible; all withdrawals are subject to income tax. |
|Income Restrictions ||You must be earning taxable income, however, income limits apply. ||You must be earning taxable income. There is no income limit. |
|Age Restrictions ||None. ||You cannot make contributions beginning in the year you reach age 70½. |
|Early Withdrawal |
(Before Age 59½)
|Before age 59½, you can withdraw your contributions at any time for any reason, without penalty or need to pay income tax. |
However, if you withdraw the earnings on your contributions, you will pay income tax on the amount and a 10% penalty may apply.
|Before age 59½, you will pay income taxes on the amount you withdraw and a 10% penalty may apply. |
|Taxes on Withdrawals |
(After Age 59½)
|After age 59½, withdrawals are tax-free, so long as your account has met the 5-year holding period requirement. ||After age 59½, you will still have to pay income taxes on any withdrawals. |
|Required Minimum Distributions (RMD) ||There are no required withdrawals. ||RMD must begin by April 1 following the year you reach age 70½. |
Low Cost Investment Options
Compare the cost of a MERS IRA with other IRAs and you'll see how MERS can help you make the most of your savings. MERS charges no annual account fee or investment transfer fees. And with MERS' professionally managed, low-cost investment choices, the MERS IRA is a smart choice for bringing diversity to your investment portfolio.
Initially, your assets will be invested in the appropriate Retirement Strategy fund using age 65 as your expected retirement age. At any point, however, you can choose to move all or any of your assets into any of the carefully selected investment options in the MERS IRA investment menu.
Contributions & Rollovers
To make contributions download the Contribution Form (MD-802) or the Rollover Form (MD-804) from your myMERS account.
- Log in to your myMERS account
- Select MERS IRA from the drop down
- Select the Resources Library tab at top and select the desired form
Interested in making contributions via payroll deduction? Ask your employer to contact MERS to find out how.
IRA Contribution Limits
To view the current year IRA contribution limits for IRAs, click to view on the IRS website.
MERS IRA Handbook
Learn more about the MERS IRA by viewing the MERS IRA Handbook (pdf).