Why You Need a Roth IRA

Individual Retirement Accounts (IRAs) were created in 1974, a boon to folks who either were not fortunate enough to participate in a company retirement plan and to others who just needed an impetus to begin saving for retirement.  They were an almost immediate success.  And by the end of 2005, according to the Investment Company Institute (ICI), IRA assets across the country totaled more than $3.3 trillion dollars.

And in today's world, with pensions few and far between, the need to personally save for retirement is more important than ever, propelling the growth of IRAs even faster and further!

The reasons for this success are twofold: tax advantages (as long as you meet the income requirements), and the allure of compounding—both benefits that can significantly increase long-term returns.

In 1998, Congress added a new twist, when legislation authorized the creation of the Roth IRA.   By the end of 2005, also according to the ICI, Americans held some $145 billion in Roth IRA assets.

Roth contribution limits are the same as traditional IRAs, but are reduced by any contributions you make to traditional IRAs.  Here is the current schedule for contributions for both types of IRAs:

2007                      $4,000­
2008                      $5,000­
2009 (and after)       $5,000

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