Traditional Individual Retirement Account (IRA)

If you are younger than age 70 for the entire tax year, and have compensation, you are eligible to establish and make an annual tax-year contribution to a traditional IRA, even if you already participate in certain government plans, a tax-sheltered annuity, a simplified employee pension (SEP) plan, a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE), or a qualified pension or profit-sharing plan established by an employer.

All earnings on your IRA contributions (deductible and/or nondeductible) remain tax deferred until you make withdrawals from the account.

See your tax or legal professional for assistance in determining IRA deductibility.

Coverdell Education Savings Accounts (CESA)

The Coverdell Education Savings Account is a nondeductible account that features tax-free withdrawals for a very specific purpose—a child’s education expenses.

These accounts were formerly known as Education Individual Retirement Accounts (IRAs), and at first glance, a CESA may look similar to traditional or Roth IRAs.  Higher education distributions are also permitted from these accounts, but while qualified higher education distributions from a traditional or Roth IRA are only penalty tax free, the same distributions from a CESA are penalty free and federal income tax free.

You should consult your tax or legal professional for further information regarding state or local income taxes.