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the Individual Retirement Account or IRA was included when the Employee Retirement Income Security Act or ERISA was introduced in 1974. This allowed employees to contribute larger amounts to their retirement fund. This provision was an improvement on the 401K. The IRA retained the conditions of the 401K to allow for tax-free contributions. Initially, the IRA was open only for workers that did not have employment-based retirement coverage. In 1981 this provision was amended to allow all taxpayers below the age of 70 to have an IRA even if they already owned a retirement plan. Also, the new provision allowed plan holders to contribute in behalf of their non-working spouse. In addition, a so-called Catch UP Plan was implemented to allow plan holders over the age of 50 years to make additional contributions. IRA comes in different categories. WE have the Traditional IRA, the Roth IRA, and the SEP IRA. Questions one might ask are: What is a Roth IRA? and How does it differ from the other IRAs? These are questions normally asked when planning for retirement. In answer to the question What is a Roth IRA Plan? it allows the plan holder to withdraw funds from the Roth IRA tax-free. The contributions one makes to the Roth IRA, however, have no effect on the income taxes that one has to pay. Answering the latter question, the traditional IRA allows for the exemption of taxes on the contributions one makes to the fund while the SEP IRA is open for owners of small businesses or self-employed individuals. The SEP IRA differs from the Traditional IRA by way of the fund being in the name of the plan holder rather than in the companys name. There are even more answers to the question What is a Roth IRA Plan? The Roth IRA was established in 1997 when the Tax Relief Act was passed into law. It took its name after the main author of the bill, Senator William Roth. Its main difference with other retirement plans is the tax-free nature of its withdrawals upon retirement but the contributions are not tax exempt. The retirement age is the same as in other plans, not less than 59 years old. In other words, it is a choice between paying taxes now or later. In recent years the popularity of the Roth IRA has increased causing people to ask What is a Roth IRA? Besides the advantages of the benefits of the Roth IRA over other retirement plans as discussed above, it has fewer restrictions on the kinds of investments the funds can be put into such as certificates of deposit and even real estate. In the event that that has not answer the question What is a Roth IRA Plan? then perhaps this will. Contributions made to the Roth IRA can be withdrawn at any time without having to pay taxes. Converted funds into the Roth IRA are also tax-free so long as the plan holder is at least 59 years old and the funds have been in the account for at least 5 years. An exemption to this rule is when a plan holder withdraws for the purchase of his first principal residence. The same exceptions to the rules apply on qualified distributions before reaching retirement age as in other retirement plans. Among these include withdrawals are expenses to defray cost of medical expenses and higher education. And what is a Roth IRA in terms of maximum age limit? It can be maintained even past the age of 70 years and passed on to a beneficiary after the death of the plan holder. For self-employed individuals or small business owners asking the question What is Roth IRA? it would be best to explore either the Solo 401K or the SEP IRA. These accounts are tailor fit for such individuals.

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