IRA General Information
Traditional IRA
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
How Much?
| YEAR | AGE 49 & BELOW | AGE 50 & ABOVE |
|---|---|---|
| 2006-2007 | $4,000 | $5,000 |
| 2008 | $5,000 | $6,000 |
- Can not exceed compensation
- Reduces contributions that can be made to Roth IRAs
Who Can Make Deductible Contributions?
Fully-deductible contributions:
- Single individuals not active in employer retirement plans
- Single individuals active in employer retirement plans with Modified Adjusted Gross Income (MAGI) from the federal tax form of less than $50,000 for 2005-2010
- Married couples with neither spouse active in employee retirement plans
- Married individuals active in employer retirement plans with joint tax returns showing MAGI of less than $80,000 (2007-2010)
- Married individuals not active in employer retirement plans with spouses who are, as long as MAGI is $150,000 or less
What are the Tax Advantages?
- Earnings grow tax-deferred until withdrawn
- Contributions may be tax deductible
When can I Withdraw without Restriction?
Withdraw penalty-free for any of the following reasons:
- Qualified higher-education expenses
- First-time home purchase *
- Age 59 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 or longer
Not intended as tax advice. Please consult a tax professional.
* Lifetime limit for exemption on first time home purchase is $10,000
Roth IRA
Who Can Contribute?
- Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following Modified Adjusted Gross Income (MAGI) from the federal tax form
- Up to $95,000 (single filers)
- Up to $150,000 (joint filers)
- Reduced contributions allowed for higher incomes (up to $110,000 for single filers and $160,000 for joint filers)
How Much?
| YEAR | AGE 49 & BELOW | AGE 50 & ABOVE |
|---|---|---|
| 2006-2007 | $4,000 | $5,000 |
| 2008 | $5,000 | $6,000 |
- Can not exceed compensation
- Reduces contributions that can be made to Traditional IRAs
Who Can Make Deductible Contributions?
What are the Tax Advantages?
- Earnings are tax-free if account is open for five 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
When can I Withdraw without Restriction?
- Regular contributions can be withdrawn tax- and penalty-free at any time
- After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons
- Age 59 ½
- Disability
- Death
- First time home purchase*
Not intended as tax advice. Please consult a tax professional.
* Lifetime limit for exemption on first-time home-purchase is $10,000
Coverdell Education Savings Account (ESA)
Who Can Contribute?
Anyone who has a Modified Adjusted Gross Income (MAGI) from the Federal tax form can contribute.
- Up to $95,000 for single filers
- Up to $190,000 for joint filers
- Some people with higher MAGI may be able to make small contributions
- Contributions not allowed after the beneficiary reaches age 18 (except for special-needs beneficiaries)
How Much?
- $2,000 per child
- Limit applies to all Coverdell ESAs for the same child
Who Can Make Deductible Contributions?
No one can deduct contributions
What are the Tax Advantages?
- Withdrawals for certain qualified education expenses are tax-free
- Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age
- Qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary educations
- A beneficiary may receive tax free distributions from a Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship credits
When can I Withdraw without Restriction?
- Withdrawals are tax- and penalty-free only for qualified expenses (earnings are subject to tax and penalty for most other withdrawals)
- Funds can be transferred from one child's account to another child's account within the same family
Not intended as tax advice. Please consult a tax professional.
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