The Roth IRA offers tax-free growth of your investment, but contributions are not tax-deductible. Eligibility is based on your adjusted gross income. You can contribute at any age, so long as your earned income falls within the allowable limits.

A Roth IRA may be an appropriate choice if you think your tax rate in retirement will be greater than it is today, or if you want the flexibility to be able to withdraw your own contributions free of federal taxes and penalties at any time. And since there are no mandatory withdrawal requirements, you can take advantage of tax-free earnings for a longer period of time than with a Traditional IRA. This feature also makes a Roth IRA a good choice for people who may want to leave money to their heirs. Although beneficiaries are subject to mandatory withdrawal requirements, they will not have to pay income tax on any accumulation so long as the Roth IRA has been open for five years.

Who Can Make Contributions to a Roth IRA ?
Your adjusted gross income (AGI) determines whether or not you can contribute to a Roth IRA:

Making Withdrawals From a Roth IRA
Since contributions to a Roth IRA are made on an after-tax basis, they can be withdrawn at any time without penalty and are free from federal taxes.

After age 59 ½
If your Roth IRA has been open for at least five years, all earnings can be withdrawn tax-free.

If your Roth IRA has not been open for at least five years, withdrawals of earnings will be subject to ordinary income tax, but the early withdrawal penalty will not apply. If your Roth IRA was converted from a Traditional IRA, earnings are subject to ordinary income tax upon withdrawal, and the amount relating to the taxable portion of your conversion will be subject to a 10% penalty tax unless an exception applies.

Before age 59½
If your Roth IRA has been open for at least five years, earnings are generally taxable and subject to a 10% early withdrawal penalty. If the withdrawal is for a qualifying first-time home purchase (up to a lifetime maximum of $10,000), death or disability, all funds can be withdrawn without penalty and are free from federal taxes. In certain other cases, earnings are subject to ordinary income tax, but not to the early withdrawal penalty.

If your Roth IRA has not been open for at least five years, earnings are generally taxable and subject to an early withdrawal penalty. If the withdrawal is for one of the exceptions listed on the next page, there is no penalty, but earnings are taxable.

Amounts are withdrawn from a Roth IRA in the following order:

1. All annual contributions
2. All conversion sums on a first-in/first-out basis
3. All earnings from dividends and gains

• First-time home purchases (up to a lifetime maximum of $10,000)
• Death or disability
• Paying for qualified higher education expenses
• Distributions taken as substantially equal periodic payments over your life expectancy
• Payments to cover medical expenses greater than 7.5% of AGI
• Payments to cover certain health insurance premiums for those receiving unemployment compensation for 12 or more consecutive weeks

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Related Links:
Traditional IRA or Roth IRA - Which IRA is right for you?
Traditional vs. Roth Comparison Chart
Traditional IRAs