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Comparing Your IRA Options To help you understand the basic differences among
these IRAs, we have created these tables for you. These highlights
will help you determine which type of IRA might be best for you. For
additional information on how each type of account would benefit your
specific situation, talk to your tax advisor. When you are ready to
contribute to an IRA, please contact SELCCU. We're here to help you
save for your goals with an IRA.
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WHO CAN CONTRIBUTE? |
| Roth |
Traditional |
Coverdell Education
Savings Account (ESA) |
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Anyone
who has income from compensation (or who is filling jointly with a spouse who earns
compensation) and your MAGI* is less than the defined limits set by
Congress. Some
people with higher MAGI* may be able to make smaller contributions.
*MAGI - modified gross income from
the federal tax form |
Anyone under age 70˝ with 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
MAGI* less than the limits set by Congress.
Some people with higher MAGI* may be able to make
smaller contributions.
Contributions not allowed after the
beneficiary reaches age 18 (except for special-needs beneficiaries).
*MAGI - modified gross income from
the federal tax form |
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HOW MUCH CAN I CONTRIBUTE? |
| Roth |
Traditional |
Coverdell Education
Savings Account (ESA) |
Total
combined contribution to Roth and traditional IRAs up to $4,000/year or 100% of
compensation, whichever is less.
Higher limit if age 50 or older. |
Total
combined contributions to Roth and traditional IRAs up to $4,000/year or 100% of
compensation, whichever is less.
Higher limit if age 50 or older. |
No more
than $2000 total each year for all Coverdell Education Savings Accounts (ESA)
for the same child. |
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WHO CAN MAKE DEDUCTIBLE
CONTRIBUTIONS? |
| Roth |
Traditional |
Coverdell Education
Savings Account (ESA) |
| No one
can deduct contributions. |
Deductible up to
annual contribution limit:
-Single individuals not active in employer retirement plans.
-Single individuals active in employer retirement plans with MAGI* below
defined limits.
-Married couples with neither spouse active in an employer retirement plan.
-Married individuals active in employer retirement plans with joint tax
returns showing MAGI* below defined limits.
-Married individuals not active in employer retirement plans with spouses
who are, as long as MAGI* is below defined limits.
Individuals with incomes exceeding the above limits may be able to deduct an
amount that is less than the maximum amount that can be contributed.
*MAGI - modified gross income from
the federal tax form |
No one
can deduct contributions. |
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WHAT ARE THE TAX ADVANTAGES? |
| Roth |
Traditional |
Coverdell Education
Savings Account (ESA) |
|
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: after age 59˝, disability, death, or a first-time home purchase.
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Earnings grow tax-deferred until withdrawn.
Contributions may be tax-deductible. |
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 education. |
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WHEN CAN I WITHDRAW WITHOUT
RESTRICTIONS? |
| Roth |
Traditional |
Coverdell Education
Savings Account (ESA) |
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Earnings are tax-free if account is open for
five tax years and withdrawn for a qualified reason (age 59˝, disability,
death, or a first-time home purchase).
Not required to start withdrawals at age 70˝. |
Withdraw
penalty-free for any of the following reasons:
-Qualified higher-education expenses
-First-time home purchase
-After age 59˝
-Disability
-Qualifying medical expenses exceeding 7.5% of income
-Payment to beneficiaries upon the owner's death
-Payment of health insurance
premiums while unemployed for twelve weeks or longer. |
Withdrawals are tax- and penalty-free only 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 another child in the family. |
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