The earlier you start saving for tomorrow, the better. With the right individual retirement account (IRA), you can set aside funds, plan for your financial future, and enjoy tax advantages too.
Whether you should open a Traditional, Roth, Educational, or combination of IRAs will depend on your individual situation. Please consult your tax advisor or a tax specialist prior to account opening.
Traditional IRA
A traditional lets you save money tax-deferred, so you can put even more away for your retirement. Instead of paying taxes on your income now, you’ll pay taxes in the future when your IRA begins disbursing funds.
Traditional IRA Features:
- Contribute tax-free income to your retirement savings.
- Interest grows tax-defered as well.
- Contributions can be tax deductible.
- Full, penalty-free withdrawals begin at age 59½.
Roth IRA
The conventional wisdom is taxes will increase as you age, so a Roth IRA allows you to pay income taxes now, allowing you to avoid income taxes on disbursements in the future.
Roth IRA Features:
- Contribute post-tax income to your retirement savings.
- Interest earned is tax-free as well.
- Early withdrawals less than or equal to contributions allowed.
- Full, penalty-free withdrawals at age 59½.
Coverdell Education Savings Account (CESA)
Sometimes, saving for tomorrow means more than saving for your own retirement. Coverdell Education Savings Accounts (Coverdell ESAs or CESAs) are tax-advantaged trust accounts that let you save money for a loved one’s college or continuing education expenses.
Coverdell ESA Features:
- Save & pay for a beneficiary's educational expenses tax-free if conditions are met.
- Funds can be used for tuition, books, class supplies, tutoring, and other primary, secondary, and collegiate expenses.
- Funds must be used prior to beneficiary turning 30-years of age except in case of special needs.
