Traditional IRA
Open this IRA when you want immediate tax benefits.
- Taxes on earnings are deferred until they're withdrawn
- Contributions may be tax-deductible in the tax year they are earned
- Qualified distributions - turning 59 1/2 years old, higher-education expenses, and first-time home purchases
Roth IRA
Contribute after-tax money to this IRA today and avoid taxes later.
- Withdrawals are tax-free
- Contributions are not tax-deductible
- Qualified distributions - turning 59 1/2 years old and first-time home purchases
Coverdell Education Savings Account
Contribute up to $2,000 per year for qualified educational expenses.
- Contribute money up until your child or grandchild turns 18
- Contributions are not tax-deductible
- Contributions and earnings can be withdrawn tax-free when used for specific educational expenses
Multiple laws dictate how much you can contribute annually to your IRA, and penalties apply to early withdrawals. With this and all similar questions about accounts and tax benefits, please consult your tax advisor.