Roth IRA plans are a wonderful thing. Not only is it a tremendous way to save for retirement on a tax deferred basis, but the real benefit to the Roth IRA is that you also take your money out tax free! However, before we get too much into that, let’s talk about the history of Roth IRA plans, and how it came to be.

The roth IRA is named for Senator William Roth of Delaware. William Roth was the advocate of the individual retirement account plan that bears his name, hence Roth IRA plans. This retirement plan was established by the Taxpayer Relief Act of 1997, and was first put in place in 1998. 

Roth IRA Plans Advantages

Advantages

- Withdrawals of your retirement funds are tax-free if the investor has reached 59 and 1/2 years of age.

- Before age 59 1/2, Up to $10,000 can be withdrawn from the Roth IRA to purchase your first home. The residence must be purchased by the Roth IRA owner, their spouse, or descendants.  Keep in mind that the Roth IRA owner must not have owned a residence within the last 24 months to qualify.

- You can make Contributions to a Roth IRA even if you contribute to other retirement plans such as the 401k, 403b or other qualified plan.

- If a Roth IRA account holder dies and his spouse is the sole beneficiary of the funds, they can combine the two separate Roth IRA accounts into 1 without worrying any penalties or tax.

- Roth IRA plans does not require that you to take out required minimum distributions (RMD’s).

Disadvantages

- The main disadvantage of Roth IRA plans is the fact that any contributions you make now do not have the benefit of being tax deductible.

- You aren’t automatically eligible for Roth IRA contributions. Many income limits apply.

-  If you pass away before retirement, the tax advantages of the Roth IRA plan may never be realized. 

Who is Eligible for Roth IRA Plans?

2010 Is the exception for those looking to convert to Roth IRA Plans

Typically, taxpayers who earn less than $100,000 are allowed to convert their  IRA into Roth IRA plans by simply paying income taxes on the tax-deferred portion of the IRA conversion. 

What about 2010? Just for this one year, the $100,000 limit is removed, so literally anyone at any income level can convert to Roth IRA plans if they want to. In addition, another provision allows folks who convert to roth ira plans in 2010 to spread the resulting increase to their taxable income over 2011 and 2012.