A Roth IRA allows tax-free withdrawals of contributions at any time in addition to providing shelter from federal taxes on earnings while they remain in the IRA. Also, you don't owe any federal income taxes or penalties on the earnings you withdraw as long as:
Your Roth IRA meets a five-year holding-period requirement; and
You're at least 59½ years of age when you withdraw the money or you're using that withdrawal to help pay for a qualified, first-time home purchase. Withdrawals due to death or disability are also tax-free and penalty-free after the five-year period.
There are income limitations associated with a Roth IRA that are dependent upon your AGI and filing status. If you do not qualify for a full contribution to a Roth IRA, you can contribute the difference to a Traditional IRA. Each year you can contribute to both types of IRAs as long as you don't exceed the total annual current-year contribution limit or 100% of compensation, whichever is less. Unlike a Traditional IRA, contributions made to a Roth IRA are not tax-deductible.
Earnings from a Roth IRA cannot be used until you reach age 59½. Withdrawals made prior to that will result in tax penalties. There is no minimum age by which distributions must begin; you can keep contributing money to the IRA for as long as you have earned income. Roth IRA Contribution Limits
The following chart summarizes contribution limits for Roth IRAs as well as catch-up contributions for those age 50 or older.
Contribution Limits
(Roth IRAs)
Year
Limit
2006-2007
$4,000
2008
$5,000
Catch-Up Contributions
(Must be age 50 or older as of the end of the year)
Year
Limit
2006 & after
$1,000
Contribution Deadline: The 2006 contribution deadline is the same as your tax filing deadline, not including extensions.
