This allows you to defer taxation until your retirement when you may be in a lower tax bracket. Contributions you make now are NOT tax-deductible, but can be withdrawn tax and penalty free at any time. Earnings can be withdrawn tax and penalty free for certain reasons after five tax years. If you do not need the immediate tax break or expect to be in a higher tax bracket when you retire, this may be the account for you. This IRA allows individuals to save money for a child's higher education on a tax-favored basis.
Withdrawals are tax and penalty free only for qualified higher education expenses.
Earnings are subject to tax and penalty for other withdrawals. Even if you do not have earned income, you are still eligible as long as your spouse has earned income that year. Educational IRA - Contributions can be made for a child under the age of 18. Contributions are not allowed in any year that a contribution is made to a state tuition program for the same IRA beneficiary. Traditional IRA - You MUST begin taking distributions from a traditional IRA at age 70 or you may face penalties.