In 1974, Congress enacted ERISA (Employee Retirement Income Security Act) as a way to encourage and defend retirement saving. A key provision of this act, IRA (Individual Retirement Account) plans allow employees to set aside part of their paychecks in tax-deductible plans. Since 1974, the federal government has changed the rules related to IRA funds many times. Here are some of the changes you’ll want to keep in mind for retirement planning now and in years to come.
1. Maximum contribution limits
The federal government has historically raised the maximum annual contribution every few years. In 1974, this limit started at $1,500, and in 2021 the limit rose is as high as $6,000 ($7,000). Prior to 2019, the last time the federal government raised the limit was in 2013, when the limit went up from $5,000 to $5,500. If you decide to pay the maximum amount each year, keep in mind that this amount will change every few years.
2. New plans such as Roth IRA
In 1997, Congress introduced the Roth IRA as an alternative to more traditional IRA types. The Roth IRA allows you to contribute to your retirement account with income that you’ve already paid taxes for, thus reducing your tax burden down the road, when you decide to retrieve your funds. Together with the innovative Roth IRA, federal law continues to consider a broad range of retirement account types over time. When planning your retirement, keep in mind that new plans may be available now or in the new future, and these plans may work better for you in the long run.
3. Tweaks to deposit and tax rules
Over time, federal guidelines have continued to find ways to make IRA contributions more useful to specific situations. Changes of this kind include the EGTRRA (Economic Growth and Tax Relief Reduction Act) which allows people over 50 to exceed the maximum contribution limit in order to make “Catch Up” payments. When planning for retirement, always look for a plan that suits your situation, and be aware that rules may change over time.
When it comes to retirement plans, IRA funds give you a great way to save money now and then access it when you know you’ll need it most. IRA plans have changed over the years and will doubtless continue to change, becoming more flexible, accessible and better suited to current retirement needs.
To find out more about IRA funds or plans, contact a Quest IRA specialist today at 855-FUN-IRAS.