The Taxpayer Relief Act of 1997 created a variety of new IRA options. Not only did it change rules for the traditional IRA, but it also introduced the Roth and Education IRA (now known as the Coverdell ESA). These options were improved by the Economic Growth and Tax Relief Reconciliation Act of 2001.

Traditional IRAs are more attractive than ever because expanded income limits mean more people will be able to make tax-deductible contributions. In addition, penalty-free withdrawals are allowed for qualified higher education expenses and for a first-time home purchase. Contributions to the Roth IRA or Coverdell ESA (Education IRA) aren’t tax deductible, but the accounts offer the opportunity for tax-free earnings.

Your tax adviser can offer more guidance on which type of IRA may be best for your needs.

Current contribution limits:
Traditional and Roth $4,000 for years 2005-2007
Coverdell ESA  $2,000 annually

Exception: If you are 50 years of age and older, you may ‘catch-up’ your contributions in the amount of $500.00 in 2005 and $1,000 in the years 2006 and later.

Click here for the most recent IRA rates.

How To Get Started
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