Named for its legislative sponsor, William V. Roth Jr., Republican senator from Delaware, the Roth IRA became available in 1998 as part of the Tax Relief Act of 1997. Mr. Roth served as a senator from 1971 to 2001.

Identification

Congress originally created the Individual Retirement Account or IRA in 1974 as a retirement savings vehicle for people not otherwise covered by a company plan. Once you reach retirement age and begin taking distributions, you pay taxes on your withdrawals as if they were regular income.

Function

Qualified distributions from a Roth IRA are tax-free.
Qualified distributions from a Roth IRA are tax-free.

The Roth IRA, by contrast, allows you to contribute and save after-tax money. As long as you own the Roth IRA for at least five years, you can take tax-free distributions beginning at age 59 1/2.

Benefits

The IRS requires that you take minimum distributions from a "Traditional" IRA beginning at age 70 1/2, whether you need them or not. You never have to remove assets from your Roth IRA if you don't need them.