• Roth IRAs are retirement vehicles.enjoying retirement image by msw from Fotolia.com
  
  Americans often must decide between a traditional or Roth individual retirement account (IRA). With a traditional IRA, your contributions are tax-deductible, but you pay taxes when you begin withdrawing money from your IRA account. A Roth IRA differs in that your initial contributions are not tax-deductible, but withdrawals are tax-free.
  
  

Eligibility

• According to the Internal Revenue Service (IRS), you are generally eligible to open a Roth IRA if have taxable income and your modified adjusted gross income (AGI) is less than $176,000 for married filing jointly status and qualifying widow(er)s. For single, head of household or married filing separately statuses, your AGI cannot exceed $120,000. If you use married filing separately status but lived with your spouse at any time during the year, the AGI limit is $10,000. These income requirements are current as of the 2009 tax year.
  
  

Conversions

• You are often permitted to convert part or all of other IRAs, including traditional IRAs, and certain employer-sponsored plans, such as 401Ks and annuities, into a Roth IRA. The IRS notes that you can receive a distribution from a traditional IRA, tax-free, as long as you roll that amount over into a Roth IRA within 60 days of receiving the distribution. You can also authorize the trustee of your current IRA account to transfer all or part of it to a Roth IRA at a different firm or within the same firm. Conversions from an employer-sponsored plan must abide by the same rules and guidelines as moves from another IRA to a Roth IRA.
  
  Erin Burt, a contributing editor at Kiplinger's Personal Finance, notes you might benefit from converting to or opening a new Roth IRA if you believe you will be in a high or higher tax bracket come retirement age. Since Roth IRA proceeds are not taxable, you will not take the tax hit you do when taking money out of a traditional IRA.
  
  

Contributions

• The IRS points out that, typically, how much you can contribute to a Roth IRA depends on whether you are contributing to a Roth IRA solely or if you are contributing to both a traditional and Roth IRA. For the former, as of the 2009 tax year, the contribution limit is the lesser amount between $5,000 ($6,000 if you are over 50 years old) and your taxable compensation. In certain cases, the IRS reduces this contribution limit when you exceed modified AGI limits.
  
  If you contribute to a Roth IRA as well as other IRAs, your contribution limits are the same, but they are simply reduced by all amounts invested in other IRAs for the same tax year.