Money Wise Investing for Your Kids

Traditional IRA

Roth IRA

Education IRA

UGMA
UTMA

Guardian

Maximum Annual Contribution

$2,000

$2,000

$500 per child (above and beyond the $2,000 total for other IRAs)

No Maximum

No Maximum

Tax Deductibility

Up to 100% depending on Annual Gross Income

Not tax
deductible

Not tax
deductible

Not tax
deductible

Not tax
deductible

Tax Treatment of Earnings

Tax-free, if used for higher education

Tax-free

Tax-free

Interest, dividends or gains taxed to the child

Taxed to the parent

Adjusted Gross Income Eligibility

As of 2000, eligibility ranges are $32k - $42k for individuals and $52k - $62k for married couples who file jointly. In 2001, these will increase to $33k - $43k for individuals and $53k - $63k for married couples filing jointly. Gradual annual limit increases are scheduled through 2007.

$95,000 or less for individuals, $150,000 or less for married couples. Above these leves, phase-out begins. Ceilings are $110,000 for individuals and $160,000 for married couples.

$95,000 or less for individuals; $150,000 or less for married couples

No restrictions

No restrictions

Withdrawal Restrictions

No penalty if the withdrawal is for college expenses

No penalty if the withdrawal is for college expenses. No penalty after age 59 1/2, if the money's been in there 5 years.

Must be used for higher education, or earnings are taxed and may be subject to 10% penalty.

None, but the parents can't legally close the account.

None

Must the Child Have Earned Income?

Yes

Yes

No

No

No

Who Controls the Account?

Parent, until child is age 18 or 21

Parent, until child is age 18 or 21

Parent, until child is 30 or all assets are distributed

Parent, until child is age 18 or 21

Parent