IMPORTANT NOTE: See the section Roth IRA Conversions in 2010 to learn about Roth IRA conversions that may be available to you even if you do not meet the criteria for a Roth IRA.

IRAs (Individual Retirement Accounts) are probably the most widely recognized tax-advantaged plans. These simple to establish accounts allow tax-deferred accumulation until distribution. The Roth IRA allows tax-free accumulation and withdrawals for those eligible to establish the account. You can establish an IRA whether or not you are covered by any other retirement plan.

The Roth IRA allows you to save money on a tax-free basis, provided you meet the eligibility requirements and the holding period rules.

The Roth IRA allows for 2009 and 2010 nondeductible contributions up to $5,000 for individuals who will not reach 50 years of age by December 31, 2009, and $6,000 for individuals who will (provided you have earned income). Roth IRAs present an opportunity to receive tax-free income when the funds are withdrawn. For 2009, the dollar limit is reduced if modified adjusted gross income (AGI) is above $166,000 if filing a joint return ($105,000 if single) and is eliminated if modified AGI is above $176,000 for joint returns ($120,000 if single). For 2010 the dollar limit is reduced if modified adjusted gross income (AGI) is above $167,000 if filing a joint return ($105,000 if single) and is eliminated if modified AGI is above $177,000 for joint returns ($120,000 if single). If your filing status is married filing separately and you lived with your spouse during the year, the phase-out range of modified AGI is $0 to $10,000. However, if you file a separate return and did not live with your spouse at any time during the year, you are not treated as married for the purpose of these limits and the applicable dollar limit is that of a single taxpayer.

The Roth contribution limit is also reduced for amounts contributed to a traditional IRA.

Tax-free, penalty-free distributions of appreciation or earnings may be made from a Roth IRA if held for at least five years and if made on or after age 59½, because of death or disability, or for "first-time homebuyers" subject to a $10,000 lifetime limit.

SUGGESTION: Contributions (not appreciation or earnings) to a Roth IRA can be withdrawn at any time, tax-free and penalty free.

The required minimum distribution rules for traditional IRAs do not apply to Roth IRAs. Distributions from Roth IRAs need not begin at age 70½.