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Certificates of Deposit & Individual Retirement Accounts

Certificates of Deposit

A certificate of deposit (CD) is a savings account with a fixed deposit amount and interest rate when the account is opened, and a set length of time to maturity. In most cases, the longer the period of time (term) of the CD, the higher the annual percentage yield (APY) will be on the deposit. Owen County State Bank currently offers several different lengths of maturity ranging from the short term of 32 days to a long term of five years. CDs of one year or longer can be opened for a minimum deposit of $500, and shorter terms require a $1,000 opening deposit. A CD may be opened for any amount over the minimum. A single CD of $25,000 or more in any given term may pay an even higher rate of interest. Special term and rate CDs may also be available. Certificates also qualify as investments in an IRA plan.

At Maturity

Most of our CDs are automatically renewable, which means that at the end of the term the payee will receive notice from the bank that the deposit will renew for another like term. The new interest rate is quoted in the renewal notice. From that date of maturity, the owner has 10 calendar days to make any desired changes in the CD such as changing the amount, term, payee, or cashing without penalty. If no changes are desired, the CD will automatically renew for the same term at the new rate.


The ownership of a CD, which is the person or persons who may close or make changes to the account, is determined by the person(s) opening the account, and is written on the payee line of the CD. Interest income is reported to the IRS under the taxpayer identification number (social security number) of the first name listed as payee. Payees may designate payable on death (POD) to other persons whom they wish as beneficiaries after the death of all payees. After the death of any payee, the CD may be cashed without an interest penalty.

Interest Penalty

The loss of interest on a CD, because of cashing in prior to the maturity date, is a factor to be considered when choosing the term of the CD. Interest penalties are set by individual financial institutions and may vary from one institution to another. Owen County State Bank penalties for early withdrawal are determined by the CD term. CDs of one year or less are penalized with three month's interest forfeiture. CDs with terms longer than one year forfeit six month's interest when cashed in before the maturity date. It is possible to make a partial withdrawal before maturity and the interest penalty is only applicable to the amount withdrawn.


Interest may be automatically deposited into any checking or savings account monthly, quarterly or at maturity on CDs with terms of 3 months or less. Quarterly compounding of interest, where interest earned is added to the balance of the CD, is also available on CDs with a term of 6 months or longer. Compounding of interest will result in a higher APY and more total interest earned during the term of the CD.

Use as Collateral

An Owen County State Bank CD may be pledged as collateral on a loan. If the loan does not exceed the CD balance, the loan rate will be set at 1.5% over the CD rate (2.0% when interest is compounded) with a minimum loan rate of 4.0% annual percentage rate (APR) (subject to change). The CD is held by the bank in the loan file while the loan is active, but interest is paid or compounded as usual.

Insured for Safety

Each depositor's funds are insured by the Federal Deposit Insurance Corporation (FDIC). A depositor may be insured on all accounts owned individually for a total of $250,000. A depositor may also be insured for an additional $250,000 on accounts held jointly with other persons or where Payees on Death are named. All self-directed retirement accounts (IRAs) owned by the same person in the same FDIC-insured bank are added together and the total is insured up to $250,000, separate and in addition to other accounts. Please see a customer service representative for additional FDIC coverage information.

Other Interest Earning Accounts

Owen County State Bank offers Money Management Checking and Choice Money Market Savings accounts which pay competitive rates of interest on the daily balance. Interest earned is added to your account and shown on your monthly statement. Our First Choice and Classic Choice checking accounts may also pay interest and combine other services into one convenient package.

Individual Retirement Accounts

To help you make the decision as to which IRA is right for you, we've provided this reference guide to explain some of the differences between the two types of IRA's. Remember that you are able to mix and match your contributions between the different types of accounts providing you follow some basic guidelines. Take a moment to read through this page and then drop by or call our home office to talk to a new account representative about your specific needs.

How are they different?

Traditional IRA

In this IRA, contributions you make to the account now are often tax deductible and then will be taxed upon withdrawal. This allows you to defer taxation until your retirement when you may be in a lower tax bracket.

Roth IRA

In this IRA, the newest one created by the Tax Payer Relief Act of 1997, contributions you make now are NOT tax-deductible, but can be withdrawn tax free for certain reasons after a five-year holding period. If you do not need the immediate tax break or expect to be in a higher tax bracket when you retire, this may be the account for you.

What are the eligibility requirements and how much can I contribute per year?

Traditional IRA

You must be under 70 and 1/2 years of age the entire tax year and have earned income to be eligible for the Traditional IRA. If you do not have earned income, but your spouse has earned income in the tax year for which you would like to contribute, you may still be eligible. You may contribute, per tax year, up to 100% of your earned income or the annual contribution limit, whichever is less.

Annual Contribution Limits for both Traditional & Roth IRAs
Contributions 2018 2019
Regular Contribution $5,500.00 $6,000.00
Catch-Up Contribution $1,000.00 $1,000.00
(Catch-Up Contribution = Additional annual contribution amount allowed if the IRA holder is 50 or older prior to the end of the taxable year)

Roth IRA

This account does not have an age restriction, however you must have earned income in the tax year for which you would like to contribute, AND your modified adjusted gross income (MAGI) cannot exceed certain limitations. You may contribute, per tax year, up to 100% of your earned income or the annual contribution limit, whichever is less. To determine your allowable contribution amount please consult your tax preparer or you can click here to visit the IRS website for guidance.

Please Note: You can contribute to BOTH a Roth and a Traditional IRA each tax year, BUT the total combined contribution must not exceed the regular or regular + catch-up limit.

When MUST I take distributions from my IRA and how do I withdraw funds without any tax penalty

Traditional IRA

You MUST begin to take distributions from a traditional IRA at age 70½ or you may face IRS penalties. After you reach age 59½ you can begin to withdraw your funds without the 10% IRS premature-distribution penalty tax (for early withdrawal).

Roth IRA

There is no required minimum distribution rule on the Roth IRA, therefore you may leave your money in a Roth IRA as long as you want. Distributions taken after you have had the Roth IRA for 5 tax years and you are at least age 59 ½ will be free of the 10% IRS premature-distribution penalty tax. Certain other qualified distributions are also exempt from the penalty tax.

IRA Contributions After Age 70½

You can't make regular contributions to a Traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or Traditional IRA regardless of your age.

What is a Direct Rollover?

A rollover is a tax-free way to move pre-tax assets from your retirement plan at work into a Traditional IRA. These funds will continue to grow on a tax-deferred basis until you withdraw them from your Traditional IRA.