If a member is not eligible to participate in an employer-sponsored pension or retirement program, the member may contribute the maximum to an IRA to claim a full tax deduction. If the member has an employer-maintained program available, the total adjusted gross income for the year will determine the tax deductibility of the contributions. The following chart outlines the deductibility of contributions. The potential advantage of this IRA is that the account grows tax free and withdrawals are tax free if certain criteria are met. Roth IRA funds may also be used for some college expenses.
Any conversions afterwards are fully taxable in the year of the conversion.
In addition, contributions are not allowed to a Traditional IRA after age 70 . The Taxpayer Relief Act of 1997 created an Education IRA to assist in saving for college education. If the first child does not go to college, the funds can be rolled over into an Education IRA for another child or grandchild. If you are rolling over or transferring an IRA, the account may be opened with the initial deposit. The dividend rate is subject to change daily based on competition and the economic environment.