IRA

The idea at the time was that people currently working would pay into the system and their money would immediately go back out in the form of benefit checks. Each generation of retiring workers would get paid by the people currently working, and therefore the system would fund itself forever despite the fact that the system had no money to start with (Heady, 118).
             In 1935, there were many more people paying into the system than those receiving benefits. The ratio of workers to retirees meant that workers did not have to pay much into the system in 1935 to support the retirees (this table shows that up through 1950, only 2% of income (1% employee, 1% employer) was withheld for Social Security, compared to 15.30% (7.65% employee, 7.65% employer) today). In the future, the retirement of millions of baby boomers will hurt the ratio; there will be so many retired people that the working people will not be able to support them. If the population had grown steadily this would not have been a problem, but there is no good way for the design of the Social Security System to handle a population spike like the baby boomers. This is way it's so important to plan for retirement by opening an IRA (Heady, 121). .
             What is an IRA? An IRA is an investment account in which a person can set aside income up to a specified amount each year and usually deduct the contributions from taxable income, with the contributions and interest being tax-deferred until retirement. There are three different types of IRA's, Traditional, Roth, and Educational. .
             Congress created the Traditional IRA in 1974. You won't pay taxes on the money you earn from this IRA until you start withdrawing the money from that account in retirement. You may also be able to deduct your annual IRA contributions from your taxable income each year. This will depend on how much money you earn. The Traditional IRA has several rules governing contributions and withdrawals (Sanders):.