Roth IRAs are a variation on the traditional IRA that offers an opportunity
for tax free, rather than tax-deferred, investment earnings. If you
qualify, you can contribute up to $3,000 a year to a Roth IRA. Contributions
are not deductible, but you generally have access to them at any time.
After you’ve had a Roth IRA for at least five tax years, you can withdraw
investment earnings tax free if:
- you are at least age 59 1/2
- you make the withdrawal in a year that you have paid qualified first-time
home-buying expenses (up to $10,000 lifetime cap)
- you become disabled
After the five-year waiting period has been met, distributions from
the account to your beneficiaries or estate at or after your death also
would be income tax free. A traditional IRA can be converted to a Roth
IRA if certain requirements are met.
