All earnings and principal are 100% tax free if rules and regulations are followed
Funds can be used to purchase a variety of investments (stocks, bonds, CD's)
Available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.
Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).
Roth IRA - Taxpayer Relief
The Roth IRA was born on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. It's named after former Senator William V. Roth, Jr.
The Roth IRA provides no deduction for contributions, but instead provides a benefit that isn't available for any other form of retirement savings: if you meet certain requirements, all earnings are tax free when you or your beneficiary withdraw them. Other benefits include avoiding the early distribution penalty on certain withdrawals, and avoiding the need to take minimum distributions after age 70½.
Roth IRA - Eligibility
You're eligible to make a regular contribution to a Roth IRA even if you participate in a retirement plan maintained by your employer. These contributions can be as much as $3,000 for 2004 or $4,000 for 2005 through 2006. (If you're 50 or older by the end of the year, add another $500 for 2004 and 2005, and $1,000 beginning in 2006.) There are just two requirements. First, you or your spouse must have compensation or alimony income equal to the amount contributed. And second, your modified adjusted gross income can't exceed certain limits. For the maximum contribution, the limits are $95,000 for single individuals and $150,000 for married individuals filing joint returns. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $110,000 (single) or $160,000 (married filing jointly).