IRA FEATURES COMPARISON CHART
| Features | Traditional IRA | Roth IRA | Coverdell Education Savings Account |
| Who Can Contribute? | Any individual who has not reached the age of 70 1/2 for the entire tax year is qualified to contribute if they or their spouse has earned income. Income limits determined whether the contributions are tax deductible. | For the 2008 tax year, individuals who meet the Adjusted Gross Income criteria in a tax year can make full contributions: - Married, filing jointly, $159,000 or less - Single, $101,000 or less Partial contributions can be made up to the following phase out ranges: |
Anyone can open a Coverdell Education Savings Account (previously called Education IRA) for a child under the age of 18 if they meet the following Adjusted Gross Income criteria in a tax year: - Married, filing jointly, $190,000 or less - Single, $95,000 or less Partial contributions can be made up to the following phase out ranges: |
| Tax Treatment | For tax year 2008, contributions are fully deductible from current taxes for: - Single individuals and married couples filing jointly, not covered under an employer retirement plan, regardless of income. - Married individuals not covered under an employer retirement plan (even if a spouse is covered) filing jointly as long as your combined adjusted gross income is under $159,000 (partial deduction allowed up to $169,000). - Single individuals covered by an employer retirement plan, $53,000 or less (full deduction) More than $53,000, but less than $63,000 (partial deduction). - Married, filing jointly, and both are covered, $85,000 or less (full deduction) more than $85,000 but less than $105,000 (partial deduction). |
All contributions are non-deductible. No deductions are allowed from current taxes. | All contributions are non-deductible. No deductions are allowed from current taxes. |
| Deadline for contributions | The tax-filing deadline (not including extensions) for 2008 contributions is April 15, 2009. | The tax-filing deadline (not including extensions) for 2008 contributions is April 15, 2009. | The tax-filing deadline (not including extensions) for 2008 contributions is April 15, 2009. |
| Annual Contributions | Tax year 2008 Under age 50: Lesser of 100% of compensation or $5,000. Non-working spouse may also contribute up to $5,000. Over age 50: Lesser of 100% of compensation or $6,000. Non-working spouse may also contribute up to $6,000. Total contributions to combination of Traditional and Roth IRAs cannot exceed this amount in one year. |
Tax year 2008 Under age 50: Lesser of 100% of compensation or $5,000. Non-working spouse may also contribute up to $5,000. Over age 50: Lesser of 100% of compensation or $6,000. Non-working spouse may also contribute up to $6,000. Total contributions to combination of Traditional and Roth IRAs cannot exceed this amount in one year. |
For 2008, the total aggregate contributions into one or more Coverdell Education Savings Accounts on behalf of a child are $2,000 for a taxable year (provided you meet the income limits above). This can be made above the maximum annual contributions to the Traditional and Roth IRAs. |
| Tax Treatment of Distributions | All non-deductible contributions are received tax-free. All earnings and deductible contributions are taxed at ordinary income tax rate when withdrawn. | Contributions are not taxable upon withdrawal. Earnings are not taxable if the following two stipulations are met: Distribution occurs after the fifth tax year* since first contribution was made to the Roth IRA and one of the following distributions is made: - After age 59 ½ - Due to Death - Due to Disability - First Time home buyer, up to $10,000 *Varies for IRAs converted to Roth IRAs. |
Distributions are not taxable if the distribution is used in the tax year to pay qualifying expenses: - Expenses incurred in connection with the enrollment or attendance of the beneficiary at a public, private, or religious school providing elementary or secondary education. Includes tuition, fees, academic tutoring, special needs services, books, supplies, and other equipment such as room and board, uniforms, transportation, computer technology and equipment if used by the beneficiary or their family during that beneficiary's period of schooling - Post-secondary tuition, fees, textbooks, supplies and equipment. - Post-secondary room and board expenses (if the beneficiary is enrolled on at least a half-time basis at an eligible institution). |
| Application of 10% Penalty Tax | A 10% early distribution penalty applies unless the distribution is: - Made after 59 ½ - Due to death or disability - To pay certain medical expenses - To pay health insurance premiums while unemployed - First time home buyer up to $10,000 - To pay higher education expenses. |
A 10% early distribution penalty applies unless the distribution is: - Made after 59 ½ - Due to death or disability - To pay certain medical expenses - To pay health insurance premiums while unemployed - First time home buyer up to $10,000 - To pay higher education expenses. - Qualified reservists called to active duty from 9/11/01. - Paid as part of a series of "substantially equal" periodic payments. |
Distributions that exceed educational expenses for the year or are made for reasons other than to pay qualified expenses, will be taxed as earned income. |
Note: This chart is for general information only and is not intended to provide specific advice or recommendations for individuals. We suggest you contact your tax advisor in regard to your personal IRA plan.
