IRA

Traditional IRAs are specially intended for retirement after age 70 ½. At the age, the tax laws require a minimum distribution to begin.The greatest advantages are that certain contributions to this type of IRA are tax deductible in the year the contributions are made, and taxes due on the earned interest are deferred until the funds are withdrawn.

Roth IRAs contributions are not tax deductible. On the other hand, while traditional IRA dividends are tax deferred, Roth IRA withdrawals are tax free IF the account holder has had a Roth IRA for more than five years; and is age 59 ½ years or older; or the holder has become permanently disabled; or is purchasing a first home; or dies. Earnings may be penalty-free and withdrawn tax-free under a variety of conditions. Contributions can be made after age 70 ½, and no withdrawals are required during the account holder’s life.

Thanks to new tax law, you can now make contributions of up to $2,000 per year to an education savings account (increased from the previous $500 limit), per child under age 18. Although contributions aren’t tax deductible, earnings accumulate tax deferred and withdrawals to pay qualified education expenses of the designated account beneficiary are free from federal taxes.

The child for whose benefit the account is established is the beneficiary and the owner of the account, and education savings account custodians report transactions under the child’s Social Security number. However, the parent or legal guardian establishes and controls the account.

The contribution deadline for a given taxable year is now April 15 of the following year. You can make contributions anytime after a child is born until the child’s 18^th birthday, although you don’t have to make a contribution every year. For special needs beneficiaries, you can continue to make contributions beyond age 18.

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IRAs can be in an IRA Accumulation account or an IRA Share Certificate. See Share Certificates for terms and annual percentage yields.