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A Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. Named for the late Senate Finance Committee Chairman William Roth, Jr., This IRA offers generous incentives to boost your retirement savings, as well as more ways to use your nest egg.

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Unlike traditional IRAs, contributions to a Roth IRA are never tax-deductible. However, the money in your Roth IRA, including earnings can be withdrawn tax-free. Of course, you must conform to certain tax requirements to get this tax-free advantage.

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You are eligible if you earn compensation and your income is less than the limits set by Congress. If you are single and you have Modified Adjusted Gross Income (MAGI) up to $95,000, you can contribute the lesser of the amount of your compensation or the annual contribution limit. If you file a joint tax return with your spouse and you have joint MAGI up to $150,000, you can contribute the lesser of the amount of your compensation or the annual contribution limit.

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The annual contribution limit for someone under age 50 is $4,000 for 2006 and 2007, and $5,000 for 2008 through 2010. The annual contribution limit for someone age 50 or older is $5,000 for 2006 and 2007, and $6,000 for 2008 through 2010.

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A smaller contribution can be made if your MAGI is between $95,000 and $110,000 for single filers, or between $150,000 and $160,000 for joint filers. When MAGI exceeds $110,000 for single filers or $160,000 for joint filers, a regular Roth IRA contribution cannot be made for that year.

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Yes, and you can contribute past age 70 1/2, as long as you continure to earn compensation.

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No. The amount you contribute to your 401(k) or other employer-sponsored plans will not be affected by your Roth IRA.

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Yes, you can contribute to both types of IRAs at the same time. You can even make contributions to both types of IRAs in the same year. But your Roth IRA contribution limit is reduced by the amount you contribute to traditional IRAs for the same year.

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You can withdraw regular contributions without paying income tax at any time. Distributions are treated as first being attributable to your regular contributions until all of your regular contributions have been distributed.

There are two requirements to qualify for tax-free withdrawals of the income your Roth IRA has earned. First, your Roth IRA must meet the "five-year test." In other words, it must be five years after the first year for which Roth contributions were made. Second, one of the following conditions must apply:

(a) You are over age 59 1/2
(b) Funds are going to your beneficiary upon your death
(c) You have become disabled
(d) You are using the funds for a first-time home purchase (lifetime limit is $10,000 per person)

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As previously noted, withdrawals are treated as the nontaxable distribution of regular contributions until all of your regular contributions have been distributed. When you begin to withdraw earnings from the account, this money will be subject to ordinary income taxes. Distributions received before age 59 1/2 that are subject to an additional ten percent early distribution tax.

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No. The Roth IRA is more flexible than a traditinal IRA because you are not required to start receiving minimum distributions when you reach age 70 1/2. If you don't need the cash, you can let your money continue to grow tax-free for as long as you like. However, minimum distributions must be made to your beneficiaries following your death.

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You can convert your traditinal IRA to a Roth IRA if your MAGI in the year of conversion is under $100,000. This limit is the same for both single filers and married couples who file jointly. Married taxpayers who file separately are not eligible for Roth conversion. Starting in 2010, anyone with a traditional IRA can convert it into a Roth IRA.

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No, the MAGI is calculated prior to adding the income resulting from the IRA conversion contribution.

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Yes. Upon conversion, you will owe ordinary income taxes on the portion of the IRA that would have been subject to income tax if you received and kept the money. Basically, you owe tax on any money that has not been taxed before.

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The ten percent early withdrawal tax is waived on IRA conversions.

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A Roth IRA distribution that is attributed to an IRA conversion contribution is not subject to income tax. If the distribution is made within five years after the conversion, then the ten percent early withdrawal tax applies, unless there is an exception.

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Yes. A Rollover or transfer from on Roth IRA to another Roth IRA is tax-free an can be made regardless of your MAGI.

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Experts recommend that you first contribute at least enough to your company plan to take full advantage of any employer match. After getting varies, depending on your circumstances. Consult with a tax professional if you are unsure

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With the same earnings rate, you can have more after-tax dollars during retirement by making the Roth contribution. This will occur if you receive distributions after you attain age 59 1/2 and at least five years after the year for which you made your first Roth contribution.

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No. The tax benefits obtained from making a Roth IRA contribution are always equal to or better than those from making a traditional IRA contribution.

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In general, a person who can afford to make the maximum Roth IRA contribution will benefit more from making Roth IRA contributions. This may not be true if you are close to retirement and it appears that your tax bracket will go down substantially after retirement. You should also consider a deductible traditional IRA contribution if losing the deduction would reduce the amount you can contribute. Seek tax advice if you are in doubt.

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Yes. Upon your death, the entire proceeds are passed on tax-free to your beneficiaries, once the five-year test has been met. This means there may be a delay before your beneficiaries will be able to receive the income earned within the Roth IRA on a tax-free basis.

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The desirability will differ with each individual's financial circumstances. Certainly, you should weigh the potential tax savings during retirement against the cost of your tax bill for the conversion. Because this decision is a complicated one, you should consult a tax professional. Consider several key questions:

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In many states, treatment of the Roth IRA for state tax purposes is the same as the treatment of the account for federal tax purposes by the IRS. Consult your tax adviser for more information on state taxes for the Roth IRA.