Wharton County's Credit Union
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®2010 - 2014 Texasgulf FCU            2101 N. Fulton St.   Wharton, TX  77488                                                         1313 West Loop, El Campo, TX  77437
                                                                  (979) 282-2300                                 Toll Free (800) 647-8428                          (979) 578-9000
 
Roth IRA
Traditional IRA
Coverdell Education
Savings Account (ESA)
Who can
contribute?
You are eligible if you earn
compensation and your
MAGI* is less than the
defined limits set by
Congress.  If your MAGI is
too high to contribute the
annual contribution limit, you
may be able to make a
smaller contribution.
Anyone under age 70
1/2 who has income
from compensation (or
who is filing jointly with a
spouse who earns
compensation).

Anyone who has
received a distribution
from a qualified
retirement plan and
decides to move the
proceeds of the plan into
an IRA.
You are eligible if your
MAGI is less than the
limits set by Congress.  If
your income is too high
to contribute the annual
contribution limit, you
may be able to make a
smaller contribution.  
Check with a tax
professional for current
figures.

Contributions not
allowed after the
beneficiary reaches age
18 (except for special
needs beneficiaries).
How much can I
contribute?
You may be able to
contribute up to:

$5,500 or
$6,500 age 50 or older

Contributions cannot exceed
compensation.
You may be able to
contribute up to:

$5,500 or
$6,500 age 50 or older

Contributions cannot
exceed compensation.
$2,000 per child each
year

Limit applies to all
Coverdell Education
Savings Accounts for the
same child
Who can make
deductible
contributions?
No one can deduct
contributions.
Deductible up to annual
constitution limit:

Single individuals not
active in employer
retirement plans

Single individuals active
in qualified retirement
plans with MAGI below
defined limits

Married couples with
neither spouse active in
an employer retirement
plan

Married individuals
active in qualified
retirement plans filing
joint tax returns with
MAGI below defined
limits

Married individuals not
active in qualified
retirement plans filing
joint tax returns with
spouses who are, as
long as MAGI is below
defined limits
No one can deduct
contributions.
What are the
tax
advantages?
Earnings are tax-deferred
and withdrawals are tax-free
if the account is open for five
(5) tax years and
withdrawals are for a
qualified reason (age 59
1/2, disability, death, or a
first-time home purchase**)

Not required to start
withdrawals at age 70 1/2
Earnings grow
tax-deferred until
withdrawn

Contributions may be
tax-deductible
Withdrawals for qualified
education expenses are
tax-free

Qualified education
expenses include 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
When can I
withdraw
without
restrictions?
Regular contributions can
be withdrawn tax-free and
penalty free at any time

After the account has been
open five (5) tax years,
earnings can be withdrawn
tax-free and penalty-free for
an of these reasons - age
59 1/2, disability, death, or a
first-time home purchase**
Withdraw penalty-free for
any of the following
reasons:

Qualified higher-
education expenses

First-time home
purchase**

Age 59 1/2

Disability

Qualifying medical
expenses exceeding
7.5% of adjusted gross
income

Payment to
beneficiaries up the
owner's death

Payment of health
insurance premiums
while unemployed for
12 weeks or longer
Withdrawals are tax-free
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
Choose the IRA that meets your needs

Learn your IRA options using this model of Traditional IRAs, Roth IRAs and Coverdell Education
Savings Accounts (ESAs).

The chart below highlights the details and advantages of the accounts.  If you are eligible to
contribute to both a Traditional IRA and a Roth IRA and are still unsure which account is right for
you, follow these general rules:

  1. Choose a Roth IRA if you don't need the tax break right now.  It's a more flexible
    investment because;
  1. You can withdraw regular contributions at any time, tax-free and penalty-free
  2. You do not have to take mandatory distributions at age 70 1/2
  1. Choose a Traditional IRA if you want the tax deduction right now.  It also makes sense if
    you anticipate paying taxes at a significantly lower rate in retirement.

Coverdell ESAs offer tax-free distributions and, unlike section 529 plans, can be used for
elementary and high school expenses at most public, private and parochial schools.
NOT INTENDED AS TAX ADVICE. PLEASE CONSULT A TAX PROFESSIONAL.

*MAGI = Modified Adjusted Gross Income.  Contribution and deductibility limits change
frequently.  Consult your tax professional regarding your individual circumstances.

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