Previously, the main advantage of an IRA was tax deferral. Reducing your tax burden when you are working and are thus in a high bracket, and transferring that burden to retirement when you will be in a lower bracket. If your tax rate at the time of withdrawal is the same or higher than when you made the deposit, there is no overall advantage. As a regular savings vehicle, an IRA had many shortcomings, the greatest being the penalty for premature withdrawal before the age of 59 . The new tax laws change all of that.
IRAs become more attractive as a retirement vehicle and as a savings vehicle.
First, a new IRA, called the Roth IRA allows nondeductible contributions to be withdrawn tax free at age 59 . Although no tax benefit is received when invested, all gains when withdrawn are tax free. Second, normal IRAs now contain provisions for withdrawal before age 59 without penalty under certain circumstances. In determining how and where to place your savings, consider IRAs, if you qualify, as an alternative. And remember, under the new tax law, more people qualify for IRAs.