Who Qualifies for an IRA?

Individual Retirement Accounts (IRA's) are investment or savings accounts that permit assets to be set aside for use during retirement. They allow those who do and do not have employer sponsored plans to grow assets with the benefit of tax advantages. Some restrictions apply to those with company plans.

History

IRA's were introduced through legislation by Congress in 1974 to offer a means for employees not covered by a company sponsored plan. Rules pertaining to IRA's later expanded and have undergone many changes since.

Eligiblity

As Internal Revenue Service rules currently stand, anyone with earned income and who is less than age 70 1/2, or who receives alimony can establish and fund a traditional IRA.

Spouses

In addition to the above, married couples with one spouse not working can make contributions on behalf of the non-working spouse.

Limits

Initially, the maximum contribution was $1500 per year. That limit has increased over time, and currently stands at $5000 annually.

Roth IRA's

A Roth IRA differs from traditional IRAs in that it is funded with after tax dollars, is permitted to grow tax free and can be withdrawn free of tax. (Traditional IRA's are funded with pre-taxed dollars and are taxed upon distribution.) With Roth IRAs, maximum age limits do not apply and there is a ceiling of how much income can be earned to be eligible.

References

• IRA information
• IRS IRA guidelines
• History of IRA's