One of America’s most important retirement vehicles is now more than 30 years old — the Individual Retirement Account (IRA) — a tax-advantaged retirement vehicle for individual investors.

The IRA was first introduced as part of the Employee Retirement Income Security Act (ERISA) of 1974 and has grown to be one of the most popular retirement vehicles in America.

Over the years the importance of this investment vehicle has increased dramatically. Changes in the business landscape have forced individuals to pick up the reins of their retirement destinies, particularly as fixed-benefit pension plans continue to taper off and individual retirement planning continues to rise. For many people, the IRA serves as a cornerstone of investing for retirement. In fact, according to a recent survey, more than 64 million participants held approximately 2.3 trillion dollars in assets in IRAs.

At its inception in 1974, the IRA annual contribution limit was set at $1,500. That limit was raised in 1981 to $2,000 — the same year that 401(k) plans were first introduced to employees. Contribution limits remained at that level for 20 years. The Taxpayer Relief Act of 1997 increased IRA options through the creation the Roth IRA and Educational IRA. These vehicles allow for penalty-free withdrawals for certain qualified purchases, such as first-time home purchases or educational expenses. Most recently, the Economic Growth and Tax Relief Reconciliation Act of 2001 increased IRA contribution limits to $5,000 per year (to be phased in over seven years). It also added a “catch up” provision for individuals over the age of 50.

Eligibility for each type of IRA varies. For a traditional IRA, joint filers must earn less than $60,000, and single filers must earn less than $40,000 as of 2003. For a Roth IRA, joint filers can earn no more than $150,000, and single filers’ earnings are limited to $95,000. For a SEP IRA, a qualifying business owner can contribute 25 percent or up to $40,000 to a SEP IRA. However, it is important that investors contact a financial advisor for specific information on contribution limits and eligibility requirements.

In just 30 short years, the IRA has helped change the way many Americans prepare for retirement. It will be interesting to see what the future holds for the evolution of this tool.