20 Years, 20 Facts


How much do you know about the Roth IRA? Here are some quick, interesting facts you may or may not already know.

  1. The Tax Relief Act of 1997 created the Roth IRA, named for the late Senator William Roth, Jr. (R-Del.), who was the driving force behind its creation.

  2. Individuals are never too old to make Roth IRA contributions, as long as they (or their spouses) have earned income.

  3. An individual’s income level is the sole determining factor for Roth IRA contribution eligibility.

  4. Individuals receive no immediate tax benefit when contributing to a Roth IRA, unless they qualify for a federal income tax credit as claimed on IRS Form 8880.

  5. The key benefit of a Roth IRA is tax-free withdrawals when qualification requirements have been met.

  6. Unlike pro-rata distributions from Traditional IRAs, special ordering rules apply to Roth IRA distributions: contributory assets come out first, conversion/rollover assets next, and earnings last.

  7. Roth IRA owners are never forced to take required minimum distributions (RMDs).

  8. Approximately 20 million people own a Roth IRA.

  9. Roth IRAs receive more regular (and catch-up) contributions than Traditional IRAs:  6.3 million taxpayers made regular contributions to Roth IRAs, compared to 4.3 million to Traditional IRAs.

  10. So far, 20 laws have changed or enhanced the Roth IRA.

  11. Individuals can roll over their after-tax 401(k) assets directly to their Roth IRAs without tax consequences.

  12. 2018 is also the 10th anniversary of retirement plan non-Roth account rollovers to Roth IRAs.

  13. Rollovers from employer-sponsored retirement plans to Roth IRAs are rare:  Less than 2% of Roth IRA owners roll over to Roth IRAs in any given year, while rollovers to Traditional IRAs hover around 10%.

  14. Individuals can convert Traditional (or SIMPLE) IRA assets to Roth IRA assets.

  15. Roth IRA conversions exploded in 2010 to nearly 10 times the amount converted in 2009 after the $100,000 income ceiling for conversions was eliminated.

  16. Few Roth IRA owners (about 4%) make withdrawals from their Roth IRAs.

  17. Roth IRA contributors tend to be younger than Traditional IRA contributors.

  18. The first two states with state-sponsored auto-enrollment Roth IRA programs (mandatory for certain employers not sponsoring retirement plans) were Oregon and Illinois, and together, more than 21,000 Roth IRAs were funded within the first year.

  19. A recent trend in legislative proposals (federal and state) is to favor Roth IRA saving over tax-deferred saving.

  20. “Rothification” became part of Congressional tax reform debates in 2017 to change pretax 401(k) plan deferrals to Roth-like after-tax deferrals.

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