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Roth IRA - Named after the Delaware senator who led its creation, the Roth IRA plan works similar to a traditional IRA with a few important differences:

• Contributions are made after-tax.
• Gains are tax-free forever no matter how much.
• Contributions (but not the earnings) can be withdrawn at anytime without any tax or other penalties.
• There are no requirements to withdraw at 70 1/2.

So essentially under Roth IRA the withdrawals (after the age 59 1/2 and a minimum five-year waiting period) are completely tax-free. This feature makes Roth IRA a versatile and powerful retirement planning tool. Just like the traditional IRA, the Roth IRA has a $2,000 cap on annual contributions and high-income individuals are subject to different maximum allowable contribution amounts. Important note: when we talk about $2,000 being the maximum contribution, be advised that this amount applies to both traditional and Roth IRAs collectively. Your total collective contributions to both IRAs cannot exceed $2,000. How you break it down, however, is up to you.

Educational IRA - This plan recently became available to parents or guardians to help set up a college fund for dependent minors. Contributions for each minor are capped at $500 annually and are not tax deductible but they are allowed to grow tax-free until the minor reaches the age of 18 at which time the proceeds may be withdrawn for qualified educational expenses. As usual, some restrictions apply. For example, those contributing to a state tuition program may not qualify for this plan. Also high-income individuals (above $95,000 annual income for singles or $150,000 for married) may not qualify for full contributions or any contributions at all. …