by James B. Gust, Esq.
Senior Editor, Merrill Anderson Co., Inc.
Once
upon a time, there was no such thing as a tax break for individual retirement
savings. That was before 1974, before
passage of the Employee Retirement Income Security Act (ERISA). The primary purpose of ERISA was make certain
that the retirement promises made by private companies to their employees would
be kept, and that tax-preferred retirement savings programs would be made
available in a nondiscriminatory fashion. But what about those who did not participate
in an employer plan? For them, the Individual Retirement Account was
created. At that time, up to $1,500
could be contributed by eligible taxpayers to an IRA, and a corresponding
deduction taken. The eligibility rules
were loosened in 1981, but the tax deduction was scaled back later for
higher-income taxpayers.
Last year the Investment Company
Institute released a new study of the important role that IRAs now play in
Americans’ financial security in retirement.
Datapoints of interest:
• 38% of all U.S. households have an
IRA.
• Total IRA assets have reached $5.7
trillion, which is more than one-quarter of all U.S. retirement assets.
• Twenty years ago, IRAs represented
just 4% of total household assets. Last year that figure was 9%.
• The growth of IRAs has been fueled
in part by rollovers from company retirement plans, accounting for half of the
traditional IRAs.
• 15.6% of households have a Roth
IRA, which was first made available in 1998.
• IRAs are being used for their
intended purpose, making retirement more financially secure. 70% of those making IRA withdrawals are 70
years old or older, while just 8% are under age 59.
How does one decide how much to
withdraw from an IRA? According to the report, most people ask their
professional financial advisor. If you’d
like help with your IRA, or a consultation on managing your retirement
investments in general, please give us a call.
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