7.6 Roth IRAs

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:

1. you are at least age 59 1/2
2. you make the withdrawal in a year that you have paid qualified first-time home-buying expenses (up to $10,000 lifetime cap)
3. 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.