How Long Has the IRA Been Around? Let’s Find Out!

An IRA is an acronym for Individual Retirement Account. It's a form of "Retirement income plan" that can benefit the aware individuals who decide to invest in IRAs by opening a self-directed IRA account. 

There are several questions around IRA, like whether IRA is beneficial?, When was IRA born? And how do I open a Self-directed IRA? Etc. 

So, let's move on quickly to the history of an IRA account. Let’s explore when did it come to force, what was the maximum limit of contribution, how did it grow, and where can you open an IRA today? 

The History of IRAs

A traditional IRA was established back on September 2, 1974, in the United States by the legislation and Employee Retirement Income Security Act (ERISA) of 1974. These Individual Retirement Accounts first became available in the year 1975. 

Anyone could contribute to an IRA as long as they earned that much income in a year.

IRA Contribution Limit from 1974 to 2019 

Back in 1974, when IRAs came into existence, the first-ever max. Contribution limit was set to $1,500. Individuals could contribute this amount for their retirement savings & tax benefits. It was until 1982 when the limit was extended to $2,000. 

In 2002 the limit was further increased to up to $3,000, in 2005 it was made $4,000 & in 2011 it was increased to $5,000.

The latest maximum limit for contributing to an IRA as of the year 2019 is $6,000 with an additional $1,000 allowed for earning individuals who are 50+ years. 

A non-working spouse can also contribute up to $6,000.

Now that you know how long has the IRA been around, let's know which IRA will suit you the best, and where should you go to open your first IRA account?

Following are some of the most popular IRA types. Every IRA account brings some tax advantage for you; they differ in their process a little. 

• Traditional IRA – It is the oldest type of IRA, where contributions are often tax-deductible. All the transactions, as well as earnings within the IRA, don't have any tax impact. The withdrawals at the time of retirement are taxed as income. Traditional IRA made famous with the Economic Recovery Tax Act of 1981.

• Roth IRA – It is the second most popular IRA where contributions are made with after-tax assets. It means the withdrawals are usually tax-free. Roth IRA introduced as a part of the Taxpayer Relief Act of 1997. What is self-directed Roth IRA or when to open a Roth IRA, if these are you queries, visit questtrustcompany.com to get all the answers.

• SEP IRA – SEP allows an employer (generally small businesses and self-employed individuals) to make contributions for his/her retirement plans. It is registered with the employer's name, and not with the company's name.

• SIMPLE IRA – People often confuse SIMPLE with SEP IRA. However, there is a difference between a SEP and SIMPLE IRA. A SIMPLE IRA stands for Savings Incentive Match Plan for Employees that needs employer matching contributions to the plan for each employee. This plan is similar to 401(k) IRA plan but has lower contribution limits.

Quest Trust Company -You One Stop Solution

Opening an IRA is no more a hassle-full task. Quest Trust Company makes it a breeze for you. Register today to get started for a better, happier & wealthier future!

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