Education IRAs allow you to save for qualified higher educational expenses for a beneficiary. Parents and guardians are allowed to make nondeductible contributions to an education IRA for a child under the age of 18.
Contributions are allowed prior to the beneficiary turning 18,
and contributions may not exceed $2,000 per beneficiary per year.
Contributions are made with after-tax dollars. There is NO deduction for the contribution. Withdrawals, however, are tax- and penalty-free when adhering to certain rules.
The traditional IRA allows you to contribute an amount and take a current deduction for the contribution. Withdrawal minimums must begin at a certain age and all withdrawals are taxable at the rate applicable when withdrawals are made. The main benefit is that any growth or gains remain free from taxation up to the point of withdrawal. Thus you would be getting tax-free accumulation.
The Roth IRA is perhaps the simplest – and potentially the most effective – sheltered account available.
Roth IRA has a tax structure https://us-southeast-1.linodeobjects.com/precious-metals-pr/storage-options.html different from any other IRA: contributions are after-tax (no deduction is available) but growth is tax-free; AND once you put your money in you NEVER pay taxes again.
Additionally, unlike a regular IRA, a Roth IRA does not require that you start withdrawing funds at age 70½ or any other time.
It’s more flexible…
Since you have already paid taxes up front, there are no minimum distribution requirements and since withdrawals are not reportable income, they won’t affect your adjusted gross income during retirement.
There are special techniques and strategies in creating and managing ANY IRA that create some huge benefits for the right person under the right circumstances.