8. Roth IRA
The most notable thing about a Roth is withdrawals are tax-free if the account has been open for at least five years and you're at least 59 1/2 when you start to withdraw money. Contributions to a Roth are not tax deductible. "You can withdraw your contributions anytime you want, no penalty or taxes," says Barry Picker, CPA with Picker & Auerbach. You can also withdraw earnings for a qualifying event if the account is at least five years old. Qualifying events include: death or disability of the account holder and a first-home purchase.
9. Tax-free and penalty-free withdrawals
You can take money out of your IRA tax-free and penalty-free as long as you repay the full amount within 60 days, but you may only do it once in a 12-month period. The withdrawal provision was intended to make IRAs portable, says Picker. "It's not for short-term loans." But some account holders use the rule to make loans to themselves. And many financial planners caution against it. The situation is "fraught with the potential for missing the deadline, not having the money and having a taxable event," says Peggy Cabaniss, CFP and partner of HC Financial Advisors. A short-term IRA loan "would be my last resort," she says.
10. Education IRA
This account was years ago renamed Coverdell Education Savings Account, or ESA, in honor of the late Sen. Paul Coverdell, but you still hear the term "education IRA" pop up. This is not strictly an IRA, since it doesn't finance retirement, but when it was created, the general rules reminded folks of an IRA, hence the nickname. Instead, you make annual contributions, of up to $2,000 per child, to a Coverdell ESA to help pay education costs. You can't deduct the Coverdell contributions from your income taxes, but earnings are tax-deferred and qualified withdrawals, for certain school costs from elementary school to college, are tax-free.