Who is 'Roth' anyway? Legacy of the Roth IRA Originator

By Kevin Voigt

Former U.S. Sen. William Roth was a champion of Reagan-era tax cuts, known for his investigations into $640 Pentagon toilet seats and his penchant for bringing a Saint Bernard dog to public events. But today he is perhaps best known for the eponymous retirement product his legislation created: the Roth IRA.

"Bill was a big-picture guy," recalls Don Kirtley, a longtime advisor to the Republican Delaware senator. "He said he wanted to create 'a culture of savings rather than spending' ... he saw the Roth IRA as a way to do that."

The Roth IRA was created in 1997, and unlike a traditional individual retirement account, it's based on post-tax dollars -- meaning you don't pay taxes on your savings and earnings when you withdraw them in retirement. That can save thousands of dollars, as this Roth IRA calculator shows.

The bill that created the Roth IRA marked the apex of Sen. Roth's 34 years in the U.S. Congress. But it was a Democrat who suggested the retirement product should carry Roth's name, says his widow, Senior Judge Jane Roth of the 3rd U.S. Circuit Court of Appeals.

"As the legislation was about to go into effect, [former U.S. senator] Pat Moynihan said, 'This was Bill Roth's idea; we ought to call it the "Roth IRA,'" Judge Roth says.

"I think having a Congress that could have members of different parties work together for the good of the country is something that we're lacking right now, and I think the Roth IRA is an example of what can be accomplished when members of Congress work together," she says.

When the senator was told about the plan to name the product after him, he smiled and said, "Oh, well, that would be OK," says Verna Hensley, who worked for Roth for more than 20 years as a press secretary and later head of his Delaware office. "He was a soft-spoken, mild-mannered guy who was this legislative giant in terms of programs that had an impact on people's lives," recalls Hensley, who is now vice president of public affairs at Easter Seals Delaware and Maryland's Eastern Shore.

A champion of tax cuts
Roth, a corporate attorney, was first elected to the House of Representatives in 1966 and to the U.S. Senate in 1970. He built his career as a champion for tax cuts and a sleuth for government waste, such as "high-profile inquiries into both alleged taxpayer abuses by the Internal Revenue Service and Pentagon overspending that uncovered the infamous $9,600 wrench and $640 toilet seat," the Los Angeles Times noted in his 2003 obituary.

"What people forget is before Bill came around the top tax rate was 70%, for people making Frank Sinatra kind of money," says Kirtley, who was Roth's first chief of staff. The Economic Recovery Tax Act of 1981 -- also known as the Kemp-Roth Tax Cut -- dropped the top tax bracket to 50% (the rate now hovers around 39%).

"Roth believed if you reduced the tax rate that savings would improve," Kirtley says. The Roth IRA was created over Roth's concern about working- and middle-class fortunes as the era of lifetime employment and company pensions fell away, he says.

"Bill grew up in Helena, Montana, and his parents weren't wealthy; he went to the University of Oregon and Harvard on a ROTC scholarship, and later finished his degree [after World War II] on the GI Bill," Judge Roth says. "He realized how important and difficult it was for people to save money ... one of his aims was to find incentives and methods to help people save."

An ongoing legacy
Vice President Joe Biden, who represented Delaware in the U.S. Senate with Roth earlier in his career, spoke highly of his former colleague at a 2003 memorial service for the senator, noting Roth's commitments to the environment and to civil liberties.

"Bill Roth was so much more -- so much more -- than cutting taxes," Biden said at the time, adding that Roth "understood that the federal government was both dangerous and a necessity ... and he never had any trouble distinguishing between the two. He was not driven by an ideology that blinded him to the needs of the people of his state and of the nation."

Roth's work was not without its critics. As the LA Times obituary notes, tax cuts he championed were blamed for "spiraling national deficits under President Reagan." But the legacy of the Roth IRA can be measured by its popularity -- 28.5% of retirement savers have a Roth IRA, according to a 2015 Employment Benefit Research Institute study.

"When I hear 'Roth IRA,' I think of my grandson, who was born about the time the Roth IRA became law," says Judge Roth. "I told my son, he should have called him 'Ira' ... but he went with Charlie, which is probably for the best. But every time I see him, I think of the Roth IRA."

Kevin Voigt is a staff writer at NerdWallet, a personal finance website. Email: kevin@nerdwallet.com. Twitter: @kevinvoigt.