|
Answers To Your Questions |
Traditional IRA |
Roth IRA |
Coverdell
Education Savings Account |
| What is the maximum contribution amount? |
$5,000 per year for 2008-2010.
* For owners age 50+, the limit is $6,000 per year for 2008-2010.
* Cannot exceed compensation
* Reduced by Roth IRA contribution amount |
$5,000 per year for 2008-2010.
* For owners age 50+, the limit is $6,000 per year for 2008-2010.
* Cannot exceed compensation
* Reduced by Traditional IRA contribution amount |
* $2,000 per child per year
* Contributions do not count against the limits for Traditional or Roth IRA's
*Limit applies to all Coverdell Education Savings Accounts (CESA) for the same child. |
| Are contributions tax deductible? |
Yes, if not active in employer's retirement plan. Otherwise subject to income limits** (see below) |
No |
No |
| Who can contribute? |
*Anyone under age 70 ½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
*Anyone who has received a distribution from a qualified retirement plan and decides to roll over the proceeds of the plan into an IRA. |
Anyone who has income from compensation (or is filing jointly with a spouse who earns compensation) depending on MAGI**. |
Anyone who has MAGI*:
* Single filers: up to $95,000. Partial contribution if $95,000 - $110,000
* Joint filers: up to $190,000. Partial contribution if $190,000-$220,000
* Not allowed after the beneficiary reaches age 18 (unless special needs beneficiary) |
| What are the tax advantages? |
* Earnings grow tax-deferred until withdrawn
* Contributions may be tax-deductible |
*Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 591/2, disability, death, or a first-time home purchase.
*Not required to start withdrawals at age 701/2. |
* Withdrawal for certain qualified education expenses are tax-free (including tuition, fees, books & computers required for elementary, secondary and post-secondary)
* Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age |
| When can I withdraw without restrictions? |
Withdraw penalty-free for any of the following:
* Qualified higher education expenses
* First-time home purchase
* Age 59 ½ (must begin withdrawals by age 70 ½)
* Disability
* Qualifying medical expenses exceeding 7.5% of adjusted gross income
* Payment to beneficiaries upon the owner's death
* Payment of health insurance premiums while unemployed for 12 weeks + |
* Earnings are tax-free if account is open for 5 tax years and withdrawn for a qualified reason (age 59 ½, disability, death, or a first-time home purchase***)
* Not required to start withdrawals at age 70 ½ |
* Withdrawals are tax and penalty free for qualified education expenses (earnings are subject to tax and penalty for most other withdrawals)
* Funds can be transferred from one child's account to an account for another child in the family |
| Contribution Deadline |
April 15th or tax return deadline |
April 15th or tax return deadline |
April 15th or tax return deadline |
