What is a Roth IRA?
Like the traditional IRA, Roth IRAs allow up to $4,000 in contributions per year ($4,500 if you are over 50). Unlike the traditional IRA, however, Roth IRA contributions are not tax deductible, but earnings and distributions can be tax-free for specified purposes and subject to restrictions at the time of withdrawal. Further, you can withdraw contributions tax-free from a Roth IRA before you are 59 ½, while earnings can be withdrawn tax-free after a five year holding period for an individual over 59 ½. You may only contribute to a Roth IRA if you make less than $95,000 a year, or $150,000 a year if you are married.