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 ACHIEVE. We're here to help you save for your goals with an IRA.
Who Can Contribute?
| Roth |
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
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Traditional
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Anyone under age 70½ 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.
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| ESA |
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 for.
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How Much Can I Contribute?
| Roth |
Total combined contribution to ROTH and Traditional IRAs up to $5,000 per year or 100% of compensation, whichever is less.
Higher limit if age 50 or older.
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Traditional
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Total combined contribution to ROTH and Traditional IRAs up to $5,000 per year or 100% of compensation, whichever is less.
Higher limit if age 50 or older.
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| ESA |
No more than $2,000 total each year for all Coverdell Education Savings Accounts (ESA) for the same child.
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How Can I Make Deductible Contributions?
| Roth |
No one can deduct contributions.
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Traditional
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Deductible up to annual contribution limit:
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Single individuals not active in employer retirement plans.
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Single individuals active in employer retirement plans with MAGI* below-defined limits.
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Married couples with neither spouse active in an employer retirement plan.
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Married individuals are active in employer retirement plans with joint tax returns showing MAGI* below-defined limits.
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Married individuals not active in employer retirement plans with spouses who are, as long as MAGI* is below defined limits.
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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.
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| ESA |
No one can deduct contributions.
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What Are Tax Advantages?
| Roth |
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 59½, disability, death, or a first-time home purchase.
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Traditional
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Earnings grow tax-deferred until withdrawn.
Contributions may be tax-deductible.
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| ESA |
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 |
Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59½, disability, death, or a first-time home purchase).
Not required to start withdrawals at age 70½.
Payment to beneficiaries upon the owner's death.
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Traditional
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Withdraw penalty-free for any of the following reasons:
- Qualified higher-education expenses
- First-time home purchase
- After age 59½
- 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.
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| ESA |
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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