Roth IRA is an individual Retirement Account which is permitted under the tax law of the U.S. its name was derived from its chief legislative sponsor (late Senator William Roth).  In comparison with other Individual Retirement Accounts (IRA), Roth IRA is different in many notable ways.

It was set up by the Taxpayer Relief Act of 1997. It can invest in securities; normally common stocks or mutual funds including other possible investments such as notes, derivatives, and certificates of deposits as well as real estate.  The Internal Revenue Service mandated particular eligibility and filing status requirements as with every IRA. The tax structure of the IRA under review is its main benefit; based on with whom it is set up, Roth Individual Retirement Account can be managed creatively, including investment in non-typical assets.

The entire contributions permitted each year to all IRAs are lesser of your taxable compensation (which differs from the adjusted gross income) as well as the limit amount - this sum may be divided up between any number of traditional and Roth IRAs).

Eligibility – Income Limits
Contributor to Roth Individual Retirement Account is limited by Congress depending on income. A taxpayer is permitted to put in the highest as may be listed, only if their Modified Adjusted Gross Income (MAGI) is less than a certain level. Or else, a phase-out of permitted contributions run equally all through the Modified Adjusted Gross Income ranges as may be stipulated. As soon as MAGI reach the top of the range, contribution is not allowed; but at least a sum of $200 may be contributed provided that MAGI is below the top of the range.  Roth Individual Retirement Account excess contributions may be regrouped into Traditional IRA contributions provided that the merged contributions are not more than that year’s limit.

Conversion Limit
Presently, just taxpayers with MAGI of below $100,000 in the year of conversion and not married filing differently, may embark on a traditional IRA to Roth IRA conversion (MAGI does not include the converted amount). The removal of the MAGI limit and filing status restriction conversions by TIPRA 2005 shall take effect from the year 2010. Therefore, no matter the income, contributions can be advanced to a traditional IRA in the other years and subsequently rolled over in 2010.

Distributions: the withdrawal of direct contributions may take place at any time. Eligible sharing of earnings (tax-free as well as penalty-free) is obligated to meet two requirements; one of the requirements is that the seasoning period of five years must have gone. The other requirement is that there must be an existence of justification such as disability or retirement. Getting to 59.5 years of age is the simplest justification, at this stage any amount of qualified withdrawals may be made on any schedule.  Also, an individual can embark on earlier retirement utilizing the substantial equal periodic payments rules. Again, justification for limited qualified withdrawals can be provided through becoming a first time home-buyer or a disabled.