Roth IRAs

Roth IRAs are an alternative personal retirement savings account that debuted in 1998. While these accounts offer no immediate tax break since contributions are not deductible, they offer long-term tax savings.

To be eligible to make contributions to a Roth IRA, you must meet two conditions:

1. You must have earned income.
2. Your MAGI cannot exceed a set limit.

Your MAGI in 2011 cannot be more than $107,000 if you are unmarried, or $169,000 if you are married filing jointly. A partial contribution is allowed if your MAGI is between $107,000 and $122,000 if you are unmarried, or $169,000 and $179,000 if you are married filing jointly. No contribution is permitted if your MAGI exceeds $129,000 if you are unmarried, or $179,000 if you are married filing jointly.

Example: You are single, age 40, with MAGI in 2011 of $75,000. You can contribute up to $4,000 to a Roth IRA in 2011. If your MAGI is over $122,000, no contribution is allowed, even if your company doesn’t have any qualified retirement plan. If your MAGI falls within the phase-out range, you can make a partial contribution.

This MAGI limit applies whether or not you participate in another qualified retirement plan.

One important condition that applies to traditional IRAs does not apply to Roth IRAs: There is no age limit for making contributions. If you continue to work past age 70û, you can continue to put money into a Roth IRA (assuming your MAGI is below the limit).