COMPARING YOUR IRA OPTIONS

·Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI:
-Up to $95,000 (single filers)
-Up to $150,000 (joint filers) *

·Reduced contributions allowed for higher incomes (up to $110,000 for single filers and $160,000 for joint filers)

·$3,000 for 2002 through 2004

·Higher limit if age 50 or older

·Cannot exceed compensation

·Reduces contributions that can be made to traditional IRA’s

·No one can deduct contributions

·Regular contributions can be withdrawn tax – and penalty-free at any time

·After the account has been open five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons: age 59 ½, disability, death, or a first-time home purchase**

·Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59 ½, disability, death, or a first-time home purchase**)

·Not required to start withdrawals at age 70 ½

·Anyone under age 70 ½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)

·$3,000 for 2002 through 2004

·Higher limit if age 50 or older

·Cannot exceed compensation

·Reduces contributions that can be made to Roth IRAs

·Fully-deductible contributions:

-Single individuals not active in employer retirement plans (regardless of income)

-Single individuals active in employer retirement plans with MAGI* of less than $34,000

-Married couples with neither spouse active in an employer retirement plan (regardless of income)

-Married individuals active in employer retirement plans with joint tax returns showing MAGI* of less than $54,000

-Married individuals not active in employer retirement plans with spouses who are, as long as MAGI* is $150,000 or less

·Individuals with incomes exceeding the above limits may be able to deduct an amount that is less than the maximum that can be contributed.

·Earnings grow tax-deferred until withdrawn

·Contributions may be tax-deductible

Withdraw penalty-free for any of the following reasons:

·Qualified higher-education expenses

·First-time home purchase **

·Age 59 ½

·Disability

·Qualifying medical expenses exceeding 7.5% of adjusted gross income

·Payment to beneficiaries upon the owner’s death

·Payment of health insurance premiums while unemployed for 12 weeks or longer.

·Anyone who has MAGI*
- Single filer: up to $95,000
- Joint income for filers: up to $190,000

·Some people with higher MAGI may be able to make smaller contributions

·Contributions not allowed after the beneficiary reaches age 18 (except for special-needs beneficiaries)

·$2,000 per child

·Limit applies to all Coverdell Education Savings Accounts (ESA) for the same child

·No one can deduct contributions

·Withdrawals for certain qualified education expenses are tax-free

·Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age

·Qualified education expenses may included tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education.

·A beneficiary may receive tax-free distributions from a Coverdell ESA in the same year he or she claims the lifetime Learning or HOPE Scholarship tax credits

·Withdrawals are tax- and penalty-free only for qualified education expenses ( earnings are subject to tax and penalty for most other withdrawals)

·Funds can be transferred from one child’s account to an account for another child in the family

*  MAGI – modified adjusted gross income from the federal tax form

**  Lifetime limit for exemption on first-time home purchase is $10,000

***  Formerly known as the Education IRA