From its humble beginning in 1974 as part of the Employee Retirement Income Security Act of (ERISA), the Individual Retirement Account along with cousins Roth, SEP, and SIMPLE, has grown up. It’s now an increasingly important investment vehicle for retirement savings and tax planning. And it will become even more so as the Boomers start retiring.

In just 5 short years since the passage of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001, we have seen some significant – and positive – changes in the tax laws that affect IRAs with more to take effect between now and 2010. These include:

  • Portability between IRAs and qualified retirement plans.
  • Increased IRA contribution limits including the addition of a catch-up.
  • Roth 401(k) option starting in 2006.
  • IRA distribution to charity for donors over age 70½ for 2006 and 2007.
  • Rollover to an IRA from a qualified retirement plan by a non-spouse beneficiary beginning in 2007.
  • Direct transfer of tax refund to an IRA starting in 2007.
  • Direct rollover to a Roth IRA from a qualified retirement plan beginning in 2008.
  • Elimination of the Roth IRA income restriction for converting a traditional IRA to a Roth IRA starting in 2010.

You’ve come a long way IRA.

For an excellent history of the IRA, download a copy of The Individual Retirement Account at Age 30: A Retrospective (24 pages PDF) published in 2005 by the Investment Company Institute, the national association of the U.S. investment company industry, i.e, mutual fund companies.