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Retirement Planning
Roth IRA

The ROTH-IRA allows investors a newer option regarding retirement planning. As with a traditional IRA, you won't pay taxes on any earnings in your account while they remain there. But unlike a Traditional IRA, contributions are made on an after-tax basis.

Eligibility
You can open a ROTH IRA if you earn income from wages or salary of at least $2,000 per year. However, income limits apply:

Single Filers: AGI must be less than $95,000
Married Couples: AGI must be less than $150,000. (You qualified for a partial contribution if you are married and your AGI is between $110,000 and $160,000.

To determine your contribution for the year, you have to reduce each spouse's otherwise allowable ROTH IRA contribution limit of $4,000 by 13¢ for every dollar of Modified AGI between $110,000 and $160,000 )

Individuals over the age of 50 may be eligible for a $500 annual "catch-up" contribution.

Contributions
Your maximum IRA contribution per year can be $4,000 or 100% of earned income, whichever is less. Please note your contributions to all IRAs cannot exceed $4,000.

Deductibility
Your contributions are NOT tax-deductible. Regardless of whether or not you are an active participant in an employer's retirement plan, Roth IRA contributions are never tax-deductible.

Tax Benefits

Your contributions grow tax-free over the life of your account.
There are not up-front tax savings for any contributions.
Upon death, your beneficiaries will receive the proceeds of the account without having to pay any tax, as long as the account has been open for five years

Withdrawals

Distributions don't have to begin at age 70 1/2.
Generally, you can withdraw your Roth IRA contributions tax-free and penalty-free if your account has been open for more than five years and you are at least 59 1/2 years of age.
If you take a distribution of earnings before reaching 59 1/2 (Early Withdrawals), you will owe both the tax due and a 10% early withdrawal penalty.

Other reasons that you can withdraw money from your account:

Tax-free and penalty-free for the purchaser of a first home (Up to $10,000).
You can make penalty-free withdrawals for qualified higher education costs (for yourself, your spouse, children or grandchildren). Generally, ordinary income-tax rates would apply to the taxable portion of the withdrawal amount.
Death or Disability. If the account is less than five years old, you will owe taxes on earnings, not on original contribution. In addition, you will owe the 10% penalty on early distribution. On the other hand, if the account is older than five years old, no taxes or penalties will be owed.