Happy Anniversary to the Roth IRA! Celebrating 20 years in 2018.
IRAs started small. The first IRAs created in 1974 had two purposes:
1. As a retirement savings vehicle for employees not covered by employer retirement plans; and
2. As an account to hold distributions from employer plans on separation from service
These first IRAs could accept annual contributions not exceeding the lesser of $1,500 or 15% of earned income, only from employees who were not covered by an employer’s qualified retirement plan. Distributions from them were subject to still familiar rules — being taxable income at ordinary rates, with required minimum distributions (RMDs) starting at age 70½, and distributions before age 59½ subject to 10% penalty. They could accept rollovers from company plans.