You can open and make contributioins to a traditional IRA if:

• You (or, if you file a joint return, your spouse) received taxable compensation during the year, and
• You were not age 70 ½ by the end of the year.

You can have a traditional IRA whether or not you are covered by any other retirement plan.  However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.  (See IRS Publication 590 for details)

Assuming eligibility, total combined contributions to ROTH and Traditional IRAs up to $5,000 per year for 2005 through 2010 or 100% of compensation, whichever is less

Deductible contributions can by made by any of the following:

• Single individuals not active in employer retirement plans (regardless of income)
• Single individuals active in employer retirement plans with MAGI* of $66,000 or less
• Married couples with neither spouse active in an employer retirement plan (regardless of income)
• Married individuals active in employer retirement plans with joint tax returns showing MAGI* of $109,000 or less.
• Married individuals not active in employer retirement plans with spouses who are, as long as MAGI* is $169,000 or less

• Earnings grow tax-deferred until withdrawn
• Contributions may be tax-deductible

You can withdraw penalty free for any of the following reasons:

• Qualified high-education expenses
• First-time home purchase
• After age 59 1/2
• Disability
• Qualified medical expenses exceeding 7.5% of income
• Payment to beneficiaries upon the owners death
• Payment of health insurance premiums while unemployed

A special exception applies if you are age 50 or older that allows you to contribute an additional $500 to an IRA for the 2005 tax year, and an additional $1,000 for 2006 through 2010. This limit will not be adjusted for inflation.

Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI *

• up to $105,000 (single filers)
• up to $167,000 (joint filers)

Reduced contributions allowed for higher incomes (up to $120,000 for single filers and $177,000 for joint filers)

Total combined contributions to ROTH and Traditional IRAs up to $5,000 year or 100% of compensation, whichever is less.

No one can deduct contributions

Contributions can be withdrawn tax and penalty free at any time.

After the account has been open five tax years, earnings can be withdrawn tax and penalty free for any of the reasons listed below.

• after age 59 ½
• disability
• death
• first-time home purchase

Earnings can be withdrawn penalty-free for the same reasons as those for penalty-free withdrawals from Traditional IRAs (withdrawal may be subject to tax).

• Earnings are tax-free if an account is open for five tax years and withdrawn for a qualified reason
• Not required to start withdrawals at age 70 ½

* Withdrawals from a Roth IRA after five years are not subject to income tax or the 10 percent premature penalty if the individual is at least 59½, dies, is disabled, or uses up to $10,000 of the money for first-time purchase of a house. Withdrawals after five years, but before age 59½ for college expenses are not subject to a 10 percent penalty tax but are taxed at ordinary rates. Withdrawals of contributions are not subject to income tax or a 10 percent early withdrawal penalty. Withdrawals of earnings before five years are subject to income tax and possibly the 10 percent penalty tax.

Taxable distributions are not subject to the 10 percent early withdrawal penalty if the individual is 59½, deceased, disabled, taking equal periodic payments over his/her life expectancy for at least five years or until age 59½, whichever comes later, or for college expenses, first-time home purchase up to $10,000, certain medical expenses and certain other uses.

A special exception applies if you are age 50 or older that allows you to contribute an additional $500 to an IRA for the 2005 tax year, and an additional $1,000 for 2006 through 2010. This limit will not be adjusted for inflation.

The “Economic Growth and Tax Relief and Reconciliation Act of 2001″ raised the contribution limit for the Coverdell Education Savings Account to $2,000 per year. And starting in 2003 we will be able to make carry-back contributions. (That’s when you make a contribution for the previous year by April 15th of the current year).

The law adds elementary and secondary school educational expenses to the definition of qualified education expenses. Such expenses include tuition fees, academic tutoring, special needs services, books, supplies, equipment, room and board expenses, uniforms, transportation, educational computer technology or equipment and internet access.

School means any school that provides elementary or secondary education (kindergarten through grade 12) as determined under state law, including public, private or religious schools.

The law allows contributions for individuals with special needs beyond age 18. And the age 30 limitation does not apply for distributions for special needs beneficiaries.

Anyone who has MAGI (modified adjusted gross income for the federal tax form) of up to $95,000 for a single filer or $190,000 for joint filers in 2002 and later years. Some people with smaller MAGI may be able to make smaller contributions. Contributions are not allowed:

• once the beneficiary of the CESA reaches age 18 (except for 2002 and later years contributions after age 18 allowed for special needs beneficiaries)
• in 2001 if a contribution is made to a state tuition program for the same CESA beneficiary (does not apply to 2002 and later years)

Contributions cannot exceed a total of $2000 per year for all ESAs opened on the child’s behalf per child.

No one can deduct contributions.

• Withdrawals for qualified higher-education expenses are tax free.
• Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age.
• For 2002 and later years, qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary & post-secondary education.
• For 2002 and later years, a beneficiary may receive tax-free distributions from a CESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits.

• Withdrawals are tax and penalty free only for qualified higher-education expenses (earnings are subject to tax and penalty for other withdrawals).
• Funds can be transferred from one child’s account to another child in the family.