The original Individual Retirement Account
The term "Individual Retirement Account" reflects the fact that IRAs began as retirement savings tools. But with the new opportunities created by the Taxpayer Relief Act of 1997, IRAs could just as easily be thought of as "individual home purchase accounts," or even "individual education accounts." That's because IRAs are more flexible than they've ever been. Whether you're dreaming of a golden retirement, first home, or college diploma, an IRA can help you reach your goals.
IRAs are good investments. Since earnings inside a traditional IRA are tax-deferred, an IRA can help you reduce your tax bill each year while you save for your goals. Invest these tax savings, and you'll end up significantly ahead of non-IRA investments in the long run.
In addition, the new and improved traditional IRA gives more people (including many people who are active participants in retirement plans) the opportunity for deductible contributions. And income limits defining eligibility will continue to increase.
What if you're not eligible for a deductible contribution even with the new income limits? You can still make non-deductible contributions and enjoy the benefits of tax-deferred earnings. You may also want to consider contributing to the new Roth IRA, which offers the potential for tax-free earnings.