Who Is Senator Roth And Why Does He Have A Retirement Plan Named After Him?

By Hal Ratner
401k Forum Mutual Fund Analyst

Senator William V. Roth, Jr. (R-Del.) is - among other things - a man who raises St. Bernard dogs. It is somehow fitting that the man who has come to the rescue of so many taxpayers adores the traditional saviors of stranded, snowbound travelers.

Roth, chairman of the Senate Committee on Finance, is universally known as the creator of the "Roth IRA," a savings vehicle that has made it possible for many Americans to take more control of their retirement planning.

Roth co-sponsored the bill that created the Roth IRA in 1997. He did this in response to the limits that Congress had slapped on tax-deductible contributions to ordinary IRAs a decade earlier, which caused the once-huge public interest in IRAs to wane.

With Roth IRAs, the income limit for contributing is much higher than for a traditional IRA. Contributions to a Roth IRA are made from after-tax income - but withdrawals at retirement are tax-free.

Now Senator Roth is at it again. He has proposed legislation that includes a slew of new provisions for promoting a secure retirement for all. His proposals include:

• Creating "Roth" 401(k) and 403(b) plans. Like the Roth IRA, contributions to these plans would be made after taxes, but withdrawals could be made tax-free at retirement.
• Increasing contribution limits on all IRAs to $5,000 (from $2,000).
• Increasing annual limits on 401(k) and 403(b) plan contributions to $15,000 (from $10,000) and SIMPLE plans to $10,000 (from $6,000).
• Eliminating income caps that make some Americans ineligible to contribute to IRAs, even with after-tax income.
• Letting people over 50 who have taken time out from the work force contribute more to their pension plans in order to "catch up" with everyone else.

Roth has also proposed creating personal retirement accounts for all working Americans, modeled after the Thrift Savings Plan, a successful pension plan for federal workers that Roth created in the 1980s. His proposal is different from President Clinton's proposed Universal Savings Accounts (USA) which would see more government involvement.

And finally, the Harvard-educated lawyer and economist wants to see a 10% across-the-board tax cut.

Roth has long proclaimed that Americans need to save more. Back in the mid-1970s he sponsored the legislation that created spousal IRAs, after realizing during conversations with constituents that there was a need for non-working spouses to have their own retirement accounts. (At that time, if a person was covered by a pension plan at work, his or her spouse could not have an individual retirement account.)

Why does Roth do it? In a nutshell, he is very worried about the fact that, according to a recent survey, nearly half of all Americans have less than $10,000 in savings.

"If we can increase savings, we can not only help individuals with their retirement and alleviate some of the pressure on Social Security, but we can help keep our economy growing," he said recently.

Besides, says a spokesperson, "he has two kids and he knows what he's doing will help them out, too."

Although some critics complain that his proposals would benefit middle- and upper-income taxpayers more than lower earners, Roth has been praised for bringing the subject of retirement planning into mainstream conversation.

A down-to-earth man who regularly commutes from his Delaware home to Washington by train - a 1 ½-hour trip each way - Roth is married and has two grown children. His interests include raising St. Bernard dogs.*

Roth won his Senate seat in 1970. His current term expires this year, and the 77-year-old lawmaker has not yet announced whether he will seek a sixth term.

* [Ed. note: The photo above, from Roth's website, shows one of Roth's two St. Bernard dogs. Acquired in 1994, at the time of the Republican electoral "tidal wave" in Congress, the canine is aptly named Thor-Tsunami.]

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

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