History Of The Traditional Ira

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History of the Traditional IRA
The Individual Retirement Account, or IRA, was formed in 1974 under the Employee Retirement Income Security Act (ERISA) (Holden, Ireland, Leonard-Chambers, & Bogdan/Investment Company Institute, 2005). When the Traditional IRA was first created, it had two functions: the first was to give tax benefits to workers who contributed to an IRA without an existing employee retirement plan, and the second was to allow funds in an existing employee retirement account to be relocated to an IRA when he or she changed jobs or retired (Holden, Ireland, Leonard-Chambers, & Bogdan/Investment Company Institute, 2005). Since then, eligibility requirements and contribution limits have changed, and different forms of IRAs were established.
How a Traditional IRA Works
An individual retirement account (IRA) is an account for individuals to save money for their retirement and receive certain tax advantages on the money saved. With this account, the individual makes yearly contributions based on his or her income, and as a result, the individual obtains income tax benefits. The earnings grow without being taxed until retirement. Depending on the amount of income the individual earns, a portion or all of his or her earnings may be tax deductible (Rejda & McNamara, 2013, p. 285). Two requirements must be satisfied in order to establish a Traditional IRA: first, he or she must be younger than 70 ½ years old; second, the individual must have taxable earnings throughout

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