Who can contribute?
How much can I contribute?
Who can make deductible contributions?
What are the tax advantages?
When can I withdraw without restrictions?

Who can contribute?

ROTH IRA

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 for single filers
• Up to $150,000 for joint filers

Reduced contributions allowed for higher incomes:

• Up to $110,000 for single filers
• Up to $160,000 for joint filers

TRADITIONAL IRA

Anyone under the age 70 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.

COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)

Anyone who has MAGI:

• Up to $95,000 for single filers
• Up to $190,000 for joint filers

Some people with higher MAGI may be able to make smaller contributions.

Contributions not allowed after the beneficiary reaches 18 (except for special needs beneficiaries)

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How much can I contribute?

ROTH IRA

$4,000 for 2005-2007

For owners age 50 and older, your limits increase to $4,500 for 2005, and $5,000 for 2006 and 2007

Cannot exceed compensation

Reduces contributions that can be made to traditional IRAs

TRADITIONAL IRA

$4,000 for 2005-2007

For owners age 50 and older, your limits increase to $4,500 for 2005, and $5,000 for 2006 and 2007

Cannot exceed compensation

Reduces contributions that can be made to Roth IRAs

COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)

$2,000 per child each year

Limit applies to all Coverdell Education Savings Accounts (ESA) for the same child

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Who can make deductible contributions?

ROTH IRA

No one can deduct contributions

TRADITIONAL IRA

Fully deductible contributions:

• Single individuals not active in employer retirement plans
• Single individuals active in employer retirement plans with MAGI of less than $50,000 (2005-2010)
• Married couples with neither spouse active in an employer retirement plan
• Married individuals active in employer retirement plans with joint tax returns showing MAGI of less than:
• $70,000 (2005)
• $75,000 (2006)
• $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

COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)

No one can deduct contributions

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What are the tax advantages?

ROTH IRA

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*
  *$10,000 lifetime limit

Not required to start withdrawals at age 70

TRADITIONAL IRA

Earnings grow tax-deferred until withdrawn

Contributions may be tax-deductible

COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)

Withdrawals for certain qualified education expenses are tax-free. Qualified education expenses include tuition, fees, books, computer equipment, and technology required for elementary, secondary, and post-secondary education.

A beneficiary may receive tax-free distributions from a Coverdell ESA in the same year he or she claims a Lifetime Learning or HOPE Scholarship tax credits.

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When can I withdraw without restrictions?

ROTH IRA

Regular contributions can be withdrawn tax-free and penalty-free at any time. After the account has been open five tax years, earnings can be withdrawn tax-free and penalty–free for any of these reasons:

• age 59
• disability
• death
• or a first-time home purchase*
  *$10,000 lifetime limit

TRADITIONAL IRA

Withdraw penalty-free for any of the following reasons:

• Qualified higher-education expenses
• First-time home purchase*
  *$10,000 lifetime limit
• Age 59
• Disability
• Qualifying medical expenses exceeding 7.5% of adjusted gross income
• Payment of beneficiaries upon the owner’s death
• Payment of health insurance premiums while unemployed for 12 weeks or longer

COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)

Withdrawals are tax-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 an account for another child in the family.

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