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The IRA (individual retirement account) is the best way to accumulate tax advantaged savings for retirement in the absence of an employer sponsored plan. For individuals interested in saving for retirement they can consider a traditional tax-deductible IRA, a non tax deductible IRA and the new Roth IRA. There are certain flexible features that allow access to the funds in IRAs that make them ideal today for those wanting to use the IRA for a down payment on a home or as a college fund for children. IRA's are also very useful investments for small business owners who may wish to save for their retirement and at the same time provide retirement savings for employees and obtain a tax deduction based on their contributions ion behalf of the employees.

The Economic Recovery Tax Relief Reconciliation Act of 2001provides for greater flexibility for rolling over individual retirement accounts into qualified plans. Certain individual retirement account balances that did not originate in under employer sponsored plans, will now be eligible for rollover into 401(k) and 403(b) plans. The act essentially grants full portability between different types of plans. 

The act also makes it easier for participants to move retirement monies more freely between different retirement accounts. The act grants the IRS the authority to extend the 60 day  period for completing a rollover, where special circumstances beyond the control of the participant prevented its completion within the time frame. It also allows a spouse, inheriting qualified plan money to be able to rollover the funds into their own qualified retirement account.

Example of Taxable versus Tax Deferred  Investing

Consider the following example that illustrates the significant advantages of an IRA. Investor(a) opens an IRA with $50,000 and earns 7% over 30 years. The value of the IRA will be $420,250. Investor(b) in a 28% tax bracket invests the same $50,000 at the same rate and period but uses a taxable investment. The result is $283,082. The difference between what the investors earned over 30 years is $137,168! This is more than double the amount of the initial investment of $50,000. This example shows the powerful benefits of investing using  tax deferred dollars!