History of a Roth IRA

Do you know how Roth IRAs got their start? Most people don’t know it, but a Roth IRA is actually named after a U.S. Senator named William Victor Roth (Delaware), who also happened to be an attorney. Mr. Roth was the first to adopt the concept of a Roth IRA and it was named after him. He helped write and promote the Economic Tax Recovery Act of 1981 (AKA “Kemp-Roth Tax Cut”). Senator Roth was a strong advocate for tax cuts during his combined 33 years in the House and Senate. He died in 2003.

Why get a Roth IRA?

The goal of this type of account is to give a person more flexibility with their retirement funds, and to provide tax free withdrawals at a later point in life. There are also additional advantages that may appeal to you.

What is the difference between a traditional IRA and a Roth IRA?

The primary difference between a Roth IRA and a traditional IRA is that deposits made to a traditional IRA are tax deductable (up to a certain limit) while a Roth IRA is opened with after-tax dollars. With a traditional IRA, you pay taxes on the money withdrawn. With a Roth IRA, your withdrawals are tax-free provided you, the investor, meet certain guidelines associated with a Roth IRA (for example, you must be 59.5 years of age before you can make your first withdrawal).

It’s rare when a withdrawal from a Roth IRA account gets taxed, but it does happen (check with a licensed agent within your state to learn more as the rules vary from state to state).