|
|
|
|
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Qualifications
|
Must have earned income and not have reached age 70 1/2 by the
end of the year.
|
Must have earned income.
There are no age restrictions.
|
The designated beneficiary must be an individual under the age
of 18. The age 18 limitation will not apply
to any designated beneficiary with special needs.
|
Maximum
Annual
Contributions
|
|
|
Taxable years beginning 2004:
|
|
2005 - 2007: $4,000
2008 and after: $5,000*
|
2005 - 2007: 4,000
2008 and after: 5,000*
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$2,000 per
beneficiary. Contributions do not count against
the limits for IRA's.
|
Catch-up Contributions (age 50 and over) |
2004 - 2005: $500
2006 and after: $1,000 |
2004 - 2005: $500
2006 and after: $1,000 |
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Tax
Status of
Earnings
|
Tax-deferred until withdrawal.
|
Not taxed. Earnings grow tax-free
|
Not taxed. Earnings grow tax-free.
|
|
Contribution
Restrictions
|
Yes, if active participant in employer retirement
plan.
Contribution
Phaseouts
|
Singles |
2005-
2007 |
$50,000-$60,000 |
|
Married Couples |
2005
2006
2007
|
$70,000-$80,000
$75,000-$85,000
$80,000-$100,000 |
|
Yes,
contributions phaseout between $95,000-$110,000 for singles and $150,000-$160,000
for married couples filing jointly, and $0-$10,000 for married couples filing separate.
|
Yes, contributions phaseout between $95,000-$110,000
for
singles and married filing separate, and $190,000-$220,000
for married couples filing jointly.
|
|
Tax Deduction
|
Yes. Contributions up to the limit are fully tax deductible
if you are not an active participant in a retirement plan.
Otherwise, phaseout rules apply.
|
No.
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No.
|
Penalties
for
Early
Withdrawal
|
None if:
• Over 59 1/2
• Death or disability
• Qualified medical expenses
• Certain health insurance
• Qualified college expenses
• 1st time home purchase
(up to $10,000)
• Due to IRS levy
• Periodic payments
|
None if made after a five year period and:
• Over 59 1/2
• Death or disability
• Qualified medical expenses
• Certain health insurance
• Qualified college expenses
• 1st time home purchase
(up to $10,000)
• Due to IRS levy
• Periodic payments
|
None if:
For payment of qualified
education expense, including elementary and secondary schools (K-12th) |
Required
Distributions
|
Must begin by April following the year
participant turns 70 1/2.
|
Only after death of the participant.
|
Must be complete 30 days after beneficiary reaches
age 30 or dies. |
Contributions
After Age
70 1/2
|
Not
allowed.
|
Allowed.
|
Allowed.
|
*To be adjusted annually for inflation in $500 increments.
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