The Humble IRA

Ira GlassHey everybody exposed to some form of media of the Financial Infotainment Industrial Complex: there’s just a short time left until the April 15 deadline to contribute to your tax advantaged IRA for the previous tax year.  Which would be impossible not to know, at this point.

Oh, the humble, the homely IRA – is there a more over-hyped, under-delivering investment vehicle than this?

What more could be said that we don’t already know about the IRA?

Forthwith, I submit a few items:

Nitpicky trivia and history that for some reason I find interesting

  1. IRA is not short for “Individual Retirement Account.”  It’s actually “Individual Retirement Arrangement,” according to IRS language, which you can read here.  Who knew?
  2. IRAs date to 1974, originally open only to workers not covered by an employee sponsored retirement account – like a pension plan or 401K.  In 1981, IRAs become open to anyone under age 70.5, regardless of whether they were covered by an employer plan.  In 1986, the deductibility of IRAs became restricted, according to income limits if the worker was covered an employer plan.  Right now, deductibility limits make the IRA only minimally useful for people covered by employer plans.
  3. Contribution limits started at $1,500 from 1974 until 1980. Contribution limits rose to $2,000 from 1981 to 2001.  Since 2002 the contribution amounts have jumped steadily from $3000 in 2002 to $4,000 in 2005, to $5,000 in 2008.  The contribution limit goes up next year as well.

I’m going to post more interesting things about the IRA shortly, but on the off chance you live in a cave protected from the Financial Infotainment Industrial Complex, you’ve just got 2 weeks to go to make a 2012 contribution.  Go!  Quickly!

Please see related posts on the IRA:

IRAs don’t matter to high income people

A rebuttal: The curious case of Mitt Romney

The magical Roth IRA and inter-generational wealth transfer

The 2012 IRA Contribution Infographic

The DIY Movement and the IRA

Angel Investing and the IRA


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