It is very important that everybody who works in the United States have some sort of personal retirement account. The likelihood of being able to live off Social Security is getting slimmer and slimmer every year. If you would like to retire comfortably, you should open some sort of IRA (Individual Retirement Account) as soon as possible.

In this article, we will take a look at the Roth IRA. The Roth IRA was named after the late Senator William Roth, who was quite active in its implementation. It is a special type of retirement plan that is generally not taxed. It may be comprised of stocks and bonds, mutual funds, real estate and annuities.

A Roth IRA has a more flexible tax structure than most other types of personal retirement accounts. You make contributions to your Roth IRA in ‘post-tax’ dollars. This means that you pay taxes on your income as usual, and then you set aside money to be put into the Roth IRA.

The amount you will put into your Roth IRA is up to you (and more is better, within budget), but there are limitations. In 2011, if you are a single and head of household and up to 50 years old, you can contribute up to $5,000 of post-tax income. If you are older, you may contribute up to $6,000, if you have not fully contributed in previous years. As with any IRA, you cannot put in more than you earn. This is a savings plan, not a tax shelter. How much you can contribute is also dependent on your annual salary. If you are single and the head of your household, (or married filing separately and you did not live with your spouse at any time during the year), if your Adjusted Gross Income (AGI) is less than $107,000 per year, you can contribute fully. If your AGI falls between that amount and $122,000 the amount you can contribute lessens. If you make more than that, you do not get to participate. If you are married and file a joint tax return, (or if you are a widow or widower) you can both contribute fully until your combined income reaches $168,999. After that, the amount you can contribute declines. At $179,000 you become ineligible. There are special rules for those who are married and file separately, live with spouse spouse during the and actively participate in an employer-sponsored retirement plan such as a 401(k). In this case, you can each contribute fully if you make between zero and $9,999, you can participate at a reduced rate, and if you make more than $10,000 you cannot contribute.

Most people are eligible to start withdrawing their Roth IRA savings, without penalty of any kind, when they reach 59 ½ years old, as long as your contributions are what is referred to as ‘seasoned’. This means that the money has to have been in your Roth IRA for five years from January 1st of the year that you made your first contribution. Exceptions apply if you become disabled. One of the main differences between a Roth 401(k) and a Roth IRA is that you do not ever have to withdraw money you have put in. This makes the Roth IRA a great choice for estate planning.

The major advantages of a Roth IRA over 401(k) plans are that you can withdraw up to $10K for purchase of a new home, providing you have not owned one in the last two years. Your home must be in your name or that an a direct ancestor of descendent. In addition, you can withdraw from your Roth IRA to pay for qualified education expenses for yourself, your children and your grandchildren. You can even withdraw funds to cover medical expenses, as long as the amount not covered by other insurance or disability exceeds 7.5% of your Adjusted Gross Income. Also, a Roth IRA can be left to a beneficiary, and there will be no tax limitations unless the inheritance tax in the place where you are domiciled has been exceeded.

A Roth IRA can be ‘rolled over’ into another Roth IRA. There appear to be only two  downsides to the Roth IRA. The first that employers do not match Roth IRA contributions. Also, you must choose the investments within your Roth IRA yourself. There are many qualified financial planners that can help you with this. Overall, investing in, and regularly contributing to, a Roth IRA is a sound investment in your future financial health.