Retirement & Education Accounts

Earned income (wages, salary, self-employment) — not interest, dividends, rental income, or Social Security. IRAs are always individual, never joint.

$7,000 per person, plus a $1,000 catch-up at age 50+; the limit is combined across Traditional and Roth IRAs.

Contributions may be tax-deductible (phased out if covered by an employer plan with high income); growth is tax-deferred; ALL withdrawals taxed as ordinary income; RMDs begin at age 73.

Account open 5 years AND owner is 59½ — or the money is for death, disability, or a first-home purchase ($10,000 lifetime). Qualified distributions are 100% tax-free; no RMDs during the owner's lifetime.

Death, disability, first-time home purchase ($10K), qualified higher-education expenses, medical expenses above the IRS threshold, health insurance while unemployed, and substantially equal periodic payments.

Life insurance, collectibles (art, antiques, gems, rugs), and most uncovered options. Municipal bonds are allowed but unwise (tax-free income becomes taxable).

401(k): for-profit employers; 403(b)/TSA: public schools and 501(c)(3) nonprofits (hospitals, churches, charities); 457: state and municipal government employees.

$23,000/$23,500 in salary deferrals, plus a $7,500 catch-up at age 50+.

Defined benefit (pension): the benefit is promised and the employer bears investment risk. Defined contribution: only the contribution is defined and the employee bears the risk.

ERISA governs private-sector plans (fiduciary duty, vesting, reporting, non-discrimination). It does NOT cover public-sector plans or IRAs.

Contributions are after-tax (no federal deduction, though many states offer one), growth is tax-deferred, and withdrawals for qualified education expenses are tax-free.

A non-working spouse can contribute based on the working spouse's earned income, so a married couple can fund $14,000 total (plus catch-ups).