The Roth IRA
, which came into being through the enactment
of the Taxpayer Relief Act of 1997
, is the result of much work and suffering by former Senator William Roth
. Roth and others (notably Sen. Breaux
) fought long to create a more compelling retirement investment vehicle
for US citizens, and the success
of their creation is a testament
to their effort
The Roth IRA is similar to the Traditional IRA in many ways: assets are tax deferred while they remain in the account, the maximum contribution is $2,000 per year (subject to certain income restrictions), and the individual may direct the assets as he/she sees fit. But there is a big, big difference: while withdrawals made from a Traditional IRA may be taxable as income in the year they are made, qualified Roth withdrawals are tax free.
Because of the incredible benefit this may provide to retirees (who may not be able to afford large tax bills on their reduced incomes) , assets in Roth IRAs have skyrocketed. This trend has also been helped by the ability to "recharacterize" your IRA, moving Traditional IRA assets into a Roth, in exchange for paying income tax on the transfer.
These accounts are infrequently referred to as "back loaded" IRAs, though this should not be confused with a back-end load or other kind of sales charge.