The Benefits of Roth Accounts

Considering Tax Rates Before and After Retirement

Neal R. VanZante, PhD, CPA, CMA, CFM, CFE, and Ralph B. Fritzsch, DBA

The Taxpayer Relief Act of 1997 greatly increased the opportunity for investment in individual retirement accounts (IRA) by adding a new category of nondeductible IRA—the Roth IRA. Whereas traditional IRAs allow for tax-deferred earnings, the Roth IRA provides for tax-free earnings. As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), Roth 401(k) and 403(b) plans became available, beginning in 2006. Moreover, the Pension Protection Act of 2006 improved and made permanent most of EGTRRA's retirement provisions, thus reducing much of the uncertainty involved with offering long-term investment advice.