|
| Traditional IRA
|
| Qualifications |
Must have earned income and not have reached age 70 ½ by the end of the year. |
| Maximum Contributions |
| Before 2002: |
$2,000 |
| In 2002 through 2005: |
$3,000 |
| In 2005 through 2007: |
$4,000 |
| In 2008 and after: |
$5,000 |
|
| Tax Status of Earnings |
Tax-deferred until withdrawal. |
| Contribution Restrictions |
Yes, if active participant in employer retirement plan, phaseout between $33,000-$43,000 for singles and $53,000-$63,000 for married couples. No limits for individuals not actively participating in employer retirement plan. |
| Tax Deduction |
Yes.
Contributions up to the limit are fully tax-deductible if you are not an active participant in a retirement plan. Otherwise phaseout rules apply. |
| Penalties for Early Withdrawal |
None if:- over 59 ½
- death or disability
- qualified medical expenses
- certain health insurance
- qualified college expenses
- 1st time home purchase (up to $10K)
- due to IRS levy
|
| Required Distributions |
Must begin in April following year participant turns 70 ½. |
| Contributions After Age 70 ½ |
Not allowed. |
|
| Roth IRA
|
| Qualifications |
Must have earned income. There are no age restrictions. |
| Maximim Contributions |
| Before 2002: |
$2,000 |
| In 2002 through 2005: |
$3,000 |
| In 2005 through 2007: |
$4,000 |
| In 2008 and after: |
$5,000 |
|
| Tax Status of Earnings |
Not taxed. Earnings grow tax-free. |
| Contribution Restrictions |
Yes, contributions phaseout between $95,000-$110,000 for singles and $150,000-$160,000 for married couples. |
| Tax Deduction |
No. |
| Penalties for Early Withdrawal |
None if:- over 59 ½
- death or disability
- qualified medical expenses
- certain health insurance
- qualified college expenses
- 1st time home purchase (up to $10K)
- due to IRS levy
|
| Required Distributions |
Only after death of the participant. |
| Contributions After Age 70 ½ |
Allowed. |
|
| Coverdell ESA (formerly Education IRA)
|
| Qualifications |
The designated beneficiary must be an individual under the age of 18. Beginning in 2002, the age 18 limitation will not apply to any designated beneficiary with special needs. |
| Maximum Contributions |
| Before 2002: |
$500 per beneficiary |
| In 2002 and after: |
$2,000 per beneficiary |
Contributions do not count against the limits for IRAs. |
| Tax Status of Earnings |
Not taxed. Earnings grow tax-free. |
| Contribution Restrictions |
Yes, contributions phaseout between $95,000-$110,000 for singles and $150,000-$160,000 for married couples. For tax years beginning in 2002, $190,000-$220,000 for married couples. |
| Tax Deduction |
No. |
| Penalties for Early Withdrawal |
None if:- for payment of qualified education expenses
|
| Required Distributions |
Must be complete 30 days after beneficiary reaches age 30 or dies. |
| Contributions After Age 70 ½ |
Allowed. |
