Account Types

An Individual or Joint Taxable Account is a taxable investment account that allows investors to buy and sell our mutual funds. An investor may open this account as an individual with sole ownership or with multiple account owners and joint ownership.

This account type is most appropriate for your Emergency Fund, Home Sweet Home, Big-Ticket Items and Events, Golden Years and Giving investing goals.

Advantages:

• Account owners have more flexibility when distributing their investments compared with retirement accounts, and there are no caps on annual investment contributions.
• The assets in these accounts may be transferred in-kind to loved ones, charitable institutions or other eligible recipients resulting in potential tax and estate planning advantages for you and your family.

The minimum to open a taxable account is $500. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.

• A Traditional IRA is a tax-advantaged account designed to help investors save for retirement. You must have earned income to contribute to a Traditional IRA, and there are annual contribution limits. Distributions from Traditional IRAs are generally subject to federal income tax and state tax depending on the state in which you live, and if taken before age 59½ a 10% IRS premature distribution penalty may apply. If you reached age 70½ prior to January 1, 2020, the IRS requires you to take Required Minimum Distributions (RMDs) on most IRAs and retirement plans and pay income tax on the taxable portion of the withdrawal. If you turn age 70½ after January 1, 2020, RMDs begin the year in which you reach age 72. More information may be found on the Building Your Retirement Savings helpful tip.
• This account type is most appropriate for your Golden Years and Giving investing goals and may also be used for your Home Sweet Home and Higher Education investing goals.
• Advantages:
  • You may roll over taxable assets from qualified retirement plans into a Traditional IRA.
  • Contributions to Traditional IRAs may be tax deductible, depending on whether the investor or his or her spouse participates in an employer-sponsored retirement plan, the investor’s adjusted gross income and his or her tax-filing status.
  • IRA owners may qualify for an exception to make penalty-free distributions to purchase, build or rebuild a first home without owing the 10% early distribution penalty. The total distribution the IRA owner uses for first-time home purchases cannot exceed $10,000 during the IRA owner’s lifetime. Please consult with a tax advisor to ensure you qualify for this early distribution exception.
  • IRA owners may qualify for an exception to make penalty-free distributions if they are used to cover qualified higher education expenses for the IRA owner and/or his or her dependents. These qualified education expenses are tuition, fees, books, supplies and equipment required for the enrollment to or attendance at an eligible educational institution. Please consult with a tax advisor to ensure you qualify for this early distribution exception.
  • You can share with a qualified charity by distributing your Required Minimum Distribution (RMD) from your Traditional IRA as a Qualified Charitable Distribution (QCD). Normally, when you take your RMD, you pay taxes on it since you didn’t pay taxes on the money when you put it into your IRA. But if you are age 70½ or older and make a contribution directly from your Traditional IRA to a qualified charity, you can donate up to $100,000 without it being considered a taxable distribution. To avoid paying taxes on the donation, you must follow the IRS’s rules for QCDs. Most churches, nonprofit charities, educational organizations, nonprofit hospitals and medical research organizations are qualified charities. We highly recommend you consult with a tax advisor before making your QCD.
• IRAs can be used for many purposes. Setting up an IRA account can be a flexible way to plan for the future.

The minimum to open an IRA is $200. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.

• A Roth IRA is a tax-advantaged account designed to help investors save for retirement. To be eligible to make the full contribution to a Roth IRA, you must have taxable compensation and be under the adjusted gross income limit for your tax filing status. More information may be found in the Building Your Retirement Savings helpful tip.
• This account type is most appropriate for your Golden Years investing goals and may also be used for your Home Sweet Home and Higher Education investing goals.
• Advantages:
  • Although contributions are not tax deductible, investors may take income tax-free distributions from a Roth IRA if they are at least age 59½ and the account has been open for at least five years.
  • There is no age restriction to contributing, and Roth IRAs are not subject to required minimum distribution rules.
  • IRA owners may qualify for an exception to make penalty-free distributions to purchase, build or rebuild a first home without owing the 10% early distribution penalty. The total distribution the IRA owner uses for first-time home purchases cannot exceed $10,000 during the IRA owner’s lifetime. Please consult with a tax advisor to ensure you qualify for this early distribution exception.
  • IRA owners may qualify for an exception to make penalty-free distributions if they are used to cover qualified higher education expenses for the IRA owner and/or his or her dependents. These qualified education expenses are tuition, fees, books, supplies and equipment required for the enrollment to or attendance at an eligible educational institution. Please consult with a tax advisor to ensure you qualify for this early distribution exception.
• IRAs can be used for many purposes. Setting up an IRA account can be a flexible way to plan for the future.

The minimum to open an IRA is $200. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.

• An Education Savings Account (ESA) is a tax-advantaged account designed to help investors save for a minor’s qualified education expenses. Funds may be used to pay for elementary and secondary school expenses (kindergarten through grade 12), as well as college expenses. A parent or guardian must be named on the account as a “Responsible Individual” to exercise the powers and duties of the minor until the minor reaches the age of majority in their state of residence. There is an annual contribution limit per child.  More information may be found on the Saving for Education helpful tip.
• This account type is most appropriate for your Higher Education and Giving goals.
• Advantages:
  • Although contributions are not tax deductible, savings compound tax-deferred and withdrawals are tax-free when used to pay for eligible education expenses.
  • If you are the “responsible individual” (typically the parent or guardian), you may change the beneficiary to another family member (under age 30) without penalty.
  • Anyone can contribute on behalf of a child until he/she reaches age 18.

The minimum to open an ESA is $200. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.

• A Uniform Gift/Transfer to Minor Account (UGMA/UTMA) is a taxable account owned by a minor but controlled by a custodian until the minor reaches the age of trust termination in his or her state of residence. There may be only one custodian and one minor per account, and the assets invested must be used for the benefit of the minor. The funds in the account legally belong to the minor, and the account must use the minor’s Social Security number; however, the custodian will exercise the powers and duties of the minor until the minor reaches the age of trust termination in the state of residence. More information may be found on the Saving for Education helpful tip.
• This account type is most appropriate for your Higher Education and Giving goals.
• Advantages:
  • Although contributions are not tax deductible, there are tax benefits for investment earnings up to certain thresholds.
  • Anyone can contribute on behalf of the child until he or she reaches the custody termination age (usually 18 or 21 but varies by state).
  • There are no contribution limits, but federal gift tax rules do apply.

The minimum to open an UGMA/UTMA is $500. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.

• A Trust Account is an investment vehicle that allows a third party (the trustee) to hold and manage assets for the benefit of an individual or group of individuals (the beneficiary). Trusts are typically established with the help of an attorney, and trustees are legally obligated to act in a fiduciary duty to the beneficiaries of the trust. There are many different types of trusts and very specific rules to follow when managing them. We recommend consulting with an attorney and tax advisor prior to opening a Trust Account with Homestead Funds.
• This account type is most appropriate for your Golden Years and Giving goals.
• Please consult with an attorney or tax advisor for the estate and tax planning advantages for your specific trust account type.

The minimum to open a trust account is $500. There is no minimum if you choose to fund your account by making regular investments transferred directly from your bank account or paycheck.