This IRA is designed for individuals who want to save tax-deferred dollars and want their annual contributions to be tax-deductible. However, penalty-free withdrawals may be made at any time for college expenses or the purchase of a first home.*
The major benefit of a Roth IRA is tax-free earnings growth. Although contributions to the Roth IRA are not tax-deductible, earnings grow tax-free and your contributions can be removed at any time without federal taxes or penalties.** You are not required to receive distributions at 70 1/2 and in most cases, you can pass your Roth assets to your heirs free of federal income taxes.
Withdrawal of earnings is tax-free when certain distribution rules are met.
Coverdell Education Savings Accounts (formerly the Education IRA):
This savings account is specifically designed to provide a tax-free way to save for education expenses for any minor child until the age of 18 on a nondeductible basis. This account can be used to pay for elementary and secondary education (K-12) expenses incurred in a public, private or religious school, as well as college, technical or postgraduate work.
Earnings grow tax-free, and withdrawals for qualified education expenses are also tax-free
Health Savings Accounts (HSAs):
An HSA allows individuals to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. It works much like an IRA, except that the money is intended to be used for qualified healthcare costs.
* Check with your financial advisor for more details about the IRA that's best for you and your tax-deductibility status.
** Bank penalties may apply for early withdrawal.