Feature |
Traditional IRA |
Roth IRA |
Coverdell Education Savings |
| Adjusted Gross Income eligibility restrictions |
Almost anyone with earned income may make a contribution. Adjustable Gross Income (AGI) may affect Tax Deductibility, see below. |
Individuals earning $110,000 or married couples earning $160,000 or less may participate. |
Individuals earning $110,000 or married couples earning $220,000 or less may participate. |
| Maximum Annual Contribution |
Tax year 2007, $4000 or 100% of earned income whichever is less. Persons over 50 may make an additional contribution of $1000.
Tax year 2008, $5000 or 100% of earned income whichever is less. Persons over 50 may make an additional contribution of $1000. |
Tax year 2007, $4000 or 100% of earned income whichever is less. Persons over 50 may make an additional contribution of $1000.
Tax year 2008, $5000 or 100% of earned income whichever is less. Persons over 50 may make an additional contribution of $1000. |
$2,000 per year until age 18. |
| Tax Treatment of Dividend Earnings |
Grow tax-deferred (meaning you pay taxes on earnings upon withdrawal) |
Grow tax-free |
Grow tax-free |
| Taxes Upon Withdrawal |
Withdrawals of contributions and dividend earnings are taxed as ordinary income in the current tax bracket |
None as long a withdrawal is "Qualified" See Restrictions below. |
None as long as withdrawal is used for Education Expense |
| Withdrawal Restrictions |
Currently, most withdrawals before age 59 1/2 result in IRS penalties. Some exceptions are made for catastrophic medical expenses or disability. The new law allows for early penalty-free withdrawal for first-time home purchases and/or college expenses. |
- IRS penalty-free withdrawal after age 59 1/2, as long as the money has been in the account for at least five years.
- Penalty-free and tax-free withdrawals even prior to age 59 1/2 if the funds are used for disability or first-time home purchase, and the money has been in the account at least five years.
|
N/A |
| Age at which withdrawals must begin |
70 1/2 |
None |
Funds must withdrawn or rolled over by the time the beneficiary reaches age 30, or be transferred to another beneficiary. |
| Contributions permitted after age 70 1/2 |
No |
Yes |
There is no age restriction on Contributors only on Beneficiaries. |
