Plan Types

Traditional IRA

Individual Retirement Accounts (IRAs) are an easy way to ensure a secure retirement.

Traditional IRAs offer the following benefits:

  • Independence – individuals may open and fund IRAs without any employer participation
  • Immediate tax advantages – earnings remain tax-deferred until distributed
  • Possible tax deductions – eligible individuals can make deductible contributions
  • Accessibility – individuals may distribute IRA assets at any time
  • Flexibility – no annual contribution requirement

Roth IRA

Imagine for a moment that an individual has just received a check. She looks at her summary and notices that federal income taxes were not withheld. Her initial reaction is that something is wrong—it's not if this check is from her Roth IRA.

Two factors make this possible:

  1. First, the money an individual contributes to a Roth IRA has already been taxed (individuals cannot take a tax deduction for their Roth IRA contributions). So the principal amount is never subject to future taxes or penalties as long as individuals stay within the contribution guidelines.
  2. Second, the Roth IRA allows contributions to grow tax-deferred. If an individual does not withdraw any of the earnings until she has had the Roth IRA for at least five years and has a qualifying event, those tax-deferred earnings become tax-free.

Unlike the Traditional IRA, there is no 70½ age limit on making contributions. But individuals must have earned income, which is defined the same as for Traditional IRAs. As long as an individual satisfies the Roth IRA requirements, she may contribute to a Roth IRA, even after the year in which she attains age 70½.

Coverdell Education Savings Account (ESA)

An ESA is a savings arrangement in which contributions are invested for the purpose of funding a student’s education. ESA contributions are not tax-deductible, but they may earn interest tax-deferred until distributed, and the child will not owe tax on any distribution from the account if it is equal to or less than the child’s qualified education expenses at an eligible educational institution for the year. Amounts distributed from an ESA that exceed the child’s qualified education expenses in a taxable year may be subject to income tax and to an additional 10 percent penalty tax. If the child does not need the money for education expenses, the assets may be rolled over or transferred to a qualified family member’s ESA or to a qualified tuition program (QTP).

For an individual consultation, or to learn which retirement plan would best suite your needs contact us.

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