Deductible individual retirement accounts and Roth IRAs have been an attractive part of a retirement portfolio - if a taxpayer qualified for their use. The problem was that various income eligibility limits prevented many from taking advantage of IRAs.Nondeductible IRAs were generally available, but were often viewed as unattractive, since they offered only tax deferral on earnings - they offered no upfront deduction and required taxation at ordinary income rates on distribution and mandatory distributions starting at age 70-1/2.
The Tax Increase Prevention and Reconciliation Act of 2006, enacted in May, provided a key break by eliminating the income restrictions on rollovers to Roth IRAs starting in 2010. The Heroes Earned Retirement Opportunity Act, also enacted in May, made it easier for military personnel to contribute to IRAs. Now, the Pension Protection Act of 2006, enacted on Aug. 17, 2006, has added a whole series of provisions that should contribute to the attractiveness of IRAs.
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