Retirement Accounts (IRAs)
IRAs offer you long-term savings and certificate options for the various stages in your life. Traditional IRAs, with tax-deferred dividends, and the Roth IRA are both popular retirement savings programs. Each type of account can offer substantial tax savings. (Be sure to consult with your tax advisor.) Funds in an IRA are also insured by the NCUA for up to $250,000.
The Traditional IRA can be opened and funded without any employer participation. The account offers immedate tax benefits with contributions and earnings tax-deferred until retirement.
Traditional IRAs offer flexibility because there is no minimum contribution in any year. The Traditional comes with the ability to make certain withdrawals without penalty and the ability to take minimum distributions after age 70 1/2.
The Roth IRA
The Roth IRA is extremely popular because of its flexibility. While the Roth doesn’t provide tax deductions for contributions, the money you contribute grows tax-deferred. If you don’t withdraw any of your earnings until you have had the Roth IRA for at least five years and have a qualifying event, those tax-deferred earnings become tax free.
Coverdell Education Savings Account (ESA)
When friends and family aren’t sure what to give your child for special occasions, you may want to ask them to invest in your child’s education through the ESA. The account allows you to put aside money for your child’s elementary, secondary, and/or college education. The law allows you to contribute up to $2,000 per year for each beneficiary.
Your money is allowed to grow on a tax-deferred basis until it is withdrawn. If the withdrawals are used for educational purposes, no taxes are due.
As education expenses escalate, it’s wise to contribute a portion of your paycheck directly into this account through direct deposit.