What Roth Hath, Traditional Hath Not

What Roth Hath, Traditional Hath Not The Taxpayer Relief Act of 1997 introduced a new Individual Retirement Account (IRA) called the Roth IRA. The primary inducement to make contributions to the new Roth IRA is that distributions are tax-free if certain conditions are met. One drawback to the Roth IRA is that contributions to the account are never deductible. The passage of the Economic Growth and Tax Relief Reconciliation Act in 2001 provided for increased contributions going forward. For 2006, an individual may contribute up to $4,000 to a Roth IRA (less any contribution made to a traditional IRA). This amount will eventually be raised to $5,000 in 2008. In addition, EGTRRA established a catch-up provision. Individuals who have attained age 50 or over during the tax year may contribute an additional $1,000. Contributions to Roth IRAs are not deductible and must be in cash when made. In addition, unlike regular IRAs, there is no age restriction on making contributions. The AGI threshold for contributing to a Roth IRA is $95,000 for single individuals and $150,000 for married individuals filing a joint return. For single filers, the allowed contribution is phased out for AGI between $95,000 and $110,000. For married individuals, the allowed contribution is reduced proportionately if AGI is between $150,000 and $160,000. No Roth IRA contributions are allowed if an individual is married and files separately. The earnings attributable to contributions accumulate on a tax-deferred basis and become tax free and penalty free upon withdrawal providing the Roth IRA has been in effect for at least five years and the taxpayer: * has attained the age 59