| |
Traditional |
Roth |
CoverdellEducation Savings Account |
| Highlights |
Savings plan for those who have earned income and are not covered by an employer retirement plan OR are covered by an employer retirement plan. |
Savings plan with potentially greater tax benefit, such as through possible tax-free earnings and no mandatory distribution requirements. |
Savings plan to help individuals save for a child’s higher education expenses. |
| Contribution Limits |
2005-2007 $4,000
2008 & beyond $5,000 |
2005-2007 $4,000
2008 & beyond $5,000 |
$2,000 |
| Catch-Up Provisions |
Yes: Individuals age 50 or older: 2002-2005 $500; 2006 & beyond $1,000 |
Yes: Individuals age 50 or older: 2002-2006 $500; 2006 & beyond $1,000 |
No |
| Tax Deductible |
Possible deductions*See IRS Publication 590 |
No |
No |
| Income Limits |
Member must have earned income in order to contribute. Deductibility is based on annual gross income, and active participation in a retirement plan at work. Single individuals participating in an employer plan earning more than $60,000, and married couples participating in an employer plan earning more than $80,000 will not receive a deduction. |
Must have earned income to contribute. However, total income cannot exceed $110,000 for single individuals, and $160,000 for married individuals filing a joint tax return. Total annual income cannot exceed $100,000 in order to complete a conversion from a traditional IRA to a Roth IRA. |
The individual funding the Coverdell Education Savings account is not required to have earned income. However, if income is earned, total income cannot exceed $220,000 for married individuals. |
| Penalty Free Distribution Exceptions |
Death, disability, substantial equal periodic payments, first-time home purchase, post-secondary education expenses |
Death, disability, first-time home purchase. |
Funds can only be used for beneficiaries’ education expenses. All other distributions may be assessed a penalty. |
| Contributions |
Contributions can only be made prior to the year in which the Member turns 70 ˝. |
There is no age limit for contribution to a Roth IRA. However, there are income requirements |
Contributions can only be made prior to the minor (beneficiary) attaining the age of 18. Exceptions may apply. |
| Distributions |
Distributions must begin no later than April 1, following the Member’s 70 ˝ birthday. |
The Member is not required to take a mandatory distribution from a Roth IRA. |
The funds must be completely distributed by the beneficiaries’ 30th birthday.Exceptions may apply. |
| Contribution Deadline |
April 15th (Tax filing deadline, not including extensions) |
April 15th (Tax filing deadline, not including extensions) |
April 15th (Tax filing deadline, not including extensions) |
