Individual Retirement Account (IRA)

An excellent tool for retirement savings. Unlike most investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free.

Coverdell Education Savings Account (ESA)

Formerly Education IRA, is a great way for parents, grandparents and others to help meet the rising costs of a student’s education.

Contribution Deadlines

Traditional IRAs, Roth IRAs and Coverdell Education Savings Accounts must be opened and/or funded by the April 15th tax filing deadline to receive your tax deductions. A filing extension won’t buy you extra time.
Traditional IRA

As of January 1, 2019 the annual contribution limit is $6,000 (under the age of 50) and $7,000 (age 50 and older). The annual limit applies collectively to both Roth and Traditional IRA’s.

You can establish and contribute to a traditional IRA only before age 70½ as long as you (or your spouse, if filing a joint tax return) have earned compensation from employment, and it is within the applicable IRS limits. Investments grow on a tax deferred basis. Distributions must begin at age 70½. Contributions and earnings are taxed only upon withdrawal.

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Roth IRA

As of January 1, 2019 the annual contribution limit is $6,000 (under the age of 50) and $7,000 (age 50 and older). The annual limit applies collectively to both Roth and Traditional IRA’s.

You can establish and contribute to a Roth IRA even after age 70½ as long as you (or your spouse, if filing a joint tax return) have earned compensation from employment, and it is within the applicable IRS limits.

While contributions are not tax deductible, contributions and earnings can be withdrawn tax-free with limitations (see chart), and unlike traditional IRAs, you are not required to begin taking required minimum distributions after reaching age 70½.

Recent tax law changes make converting to a Roth IRA a smart move for more people. The law lifts previous income limits, making it possible to convert from a Traditional IRA to a Roth IRA regardless of income. And there’s more good news: Under a special rule applying to 2010 conversions, you have the option of spreading out your tax liability on a Roth IRA conversion over the 2011 and 2012 tax years.

Catch-up contributions—Individuals who have reached age 50 by the end of the year are able to make additional catch-up contributions of $1,000 per year to their traditional or Roth IRA.

Coverdell Education Savings Account

The annual contribution amount is $2,000 per beneficiary and may be limited by your Modified Adjusted Gross Income (MAGI). While there is no tax deduction for amounts contributed to a CESA, earnings grow tax-free. And your ESA can be used to pay qualified elementary school and secondary school expenses as well as those for higher education.