Individual Retirement Arrangement (IRA) Public Law 93-406

Since IRAs were first created by the 1974 Employee Retirement Income Security Act (ERISA), many variations of this basic retirement savings vehicle have been developed. Employers with 100 or less employees have the option of opening Simplified Employee Pension (SEP) IRAs or Savings Incentive Match Plans for Employees (SIMPLE) IRAs for their employees. These accounts are attractive to employers because they have far fewer administrative burdens than other employer-sponsored retirement plans. The employer and their employees can contribute up to $40,000 a year or 100 percent of their compensation (whichever is lower) to these accounts annually. These IRAs have the same tax-deferred benefits of traditional IRAs as well as the same restrictions on early withdrawals.

Roth IRAs are another version of the savings vehicle, which were created in 1998. Unlike traditional IRAs, contributions to these accounts are not tax deductible. Instead, earnings from these contributions grow tax-free and remain tax-free at distribution during retirement. While retirees must start to withdraw their money from traditional IRAs by age 70