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What is an Individual Retirement Account (IRA)? An Individual Retirement Account, or IRA, is an investment account that allows you to save and prepare for your retirement while offering tax advantages.
| Traditional IRA |
Roth IRA |
Education IRA or Coverdell Education Savings Account |
IRA Share Certificate | |
| Who is it for? | Individuals that are in a lower tax bracket at retirement that don’t qualify for a Roth, due to income level (see below income limits for Roth IRA) | Individuals that are in the same or higher tax bracket after retirement and don't exceed the income limits of a Roth IRA. | Designed for individuals who want to save for higher education for their children or grandchildren who are under the age of 18. | No |
| Maximum Yearly Contributions | $7,000/Year (if under age 50), $8,000 (if aged 50 and over) $12,000 for married couples filing jointly |
$7,000/Year (if under age 50), $8,000 (if aged 50 and over) $12,000 for married couples filing jointly | $2,000/year per, child under age 18 | $7,000 Max annual contribution for single filer, $12,000 for married filing jointly |
| Tax deductibility for contributions | Tax deferred up to 100% depending on Annual Gross Income and participation in an employer-sponsored retirement plan. | Taxes are paid up-front | Not tax deductible | No |
| Taxes at withdrawal | Withdrawals are taxed as income | Withdrawals are tax-free (Earnings are tax free after 5 years and assuming one of the following: aged 59 1/2, disabled, death & paid to beneficiary, or first time home purchase) | Withdrawals are tax-free when paying for qualified higher education fees and student is under the age of 30 | 90 day early penalty if individual does not return funds back to regular IRA. |
| Earnings | Growth is tax-deferred until withdrawn | Growth is tax-free | Growth is tax-free | No |
| Withdrawal restrictions | Withdrawals before age 59-1/2 result in IRA penalties | Withdrawals before age 59-1/2 result in IRA penalties |
No penalty when money is withdrawn to pay for qualified higher educations expenses. | No |
| Age when withdrawal MUST be done | 73 | No | Before beneficiary is 30 years of age | No |
| Income Limits | No | Single filers must earn less than $135,000/year, Married combined income must be less than $203,000 | Single filer must earn less than $110,000/year to contribute full $2,000 per child, per year. Married combined income spans up to $220,000. | No |
