Roth
IRAs were introduced in 1998 to encourage more people
to save for retirement. They resemble traditional nondeductible
IRAs in some ways. You can make an annual after-tax contribution
up to the limit set by Congress and pay no income tax on the earnings
as they accumulate.
There are important differences, though,
that may make Roth IRAs especially appealing. Your earnings are
tax free
when you withdraw, provided you’re at least 59 1/2 and your
account has been open at least five years. The entire amount is
yours to spend as you wish. And there are no required withdrawals,
which means your account can continue to compound for as long
as you like. And, if you continue to earn income, you can keep
on contributing — even when you’re 90.
Eligibility
In 2008 you’re eligible to contribute up to
the annual cap to a Roth IRA if you’re single and your
adjusted
gross income (AGI)
is less than $101,000. If your AGI is
between $101,000 and $116,000, you can put a decreasing portion
of your IRA contribution into a Roth, and the balance into a nondeductible
traditional account if you choose. If your AGI is more than $116,000,
you don’t qualify for a Roth.
If you’re married and filing a joint
return, you can contribute the full amount if your AGI is less
than $159,000, and a gradually decreasing amount up to $169,000.
If your AGI is higher than $169,000, you’re not eligible
for a Roth.
