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A Roth IRA has the same rules as a traditional IRA with a few notable exceptions. Contributions to a Roth IRA are not tax-deductible as contributions to a traditional IRA. A person can only contribute up to a certain amount to the IRA each year and there is a maximum income limit. If a person earns more than the limit, she can contribute to a traditional IRA but not the Roth

Contribution Limits

If a person has an adjusted gross income that is less than $122,000 in 2011, she can contribute up to $5,000 to a Roth IRA. People who are married and file jointly can earn up to $177,000 in 2011 and still contribute to a Roth IRA. She can only contribute money she earns during the year. For example, if her income is $3,500, she can only contribute $3,500 to her IRA. If a person is over age 50, she contribute an extra $1,000 to her IRA each year, for a total of $6,000.

The $5,000 limit is the total combined for all the IRAs a person may have. For example, if someone has a Roth and traditional IRA, she may only contribute up to $5,000 total to the accounts, not $5,000 to each account. Married couples can contribute $5,000 each.

Taxes

Unlike a traditional IRA, the contributions to a Roth IRA are no tax-deductible in the year they are contributed. This has several benefits. When it is time to withdraw the money from a traditional IRA, a person will have to pay tax on the earnings and on the original amount. When it is time to take a withdrawal from a Roth IRA, no taxes are due on the money, for both original contributions and any earnings. Not owing taxes in retirement is beneficial if a person expects that they will be in a higher tax bracket during their retirement years.

Other Rules

People usually need to wait until they are age 59 1/2 before they can withdraw from a Roth IRA. There are a number of exceptions to this rule. For example, a person can use the money in an IRA to purchase their first home. Unlike traditional IRAs, a person can leave the money in the account indefinitely and does not need to begin taking distributions at age 70 1/2.

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