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ROTH IRA Plans are personal saving plans that provide income tax benefits on savings maintained for retirement purposes. These benefits are subject to certain rules prescribed by the US Congress and implemented by the IRS, and prescribe certain limitations on the total amount that can be deposited in an Individual retirement account or IRA. These rules are usually modified every year, and the latest of these modifications have been introduced for the year 2008.

Roth IRA accounts are different from traditional IRA account in the way income tax benefits are availed. In a traditional IRA account, the contribution made to the account is deducted from taxable income. For example, if pre-tax income is $ 50,000 out of which a contribution of $ 4000 is made to IRA, then tax will be payable only on the remainder of $ 46,000. However, when this contribution along with the returns earned by it is withdrawn, it will be treated as income, and tax will have to paid on it. In the Roth IRA, the contribution made to the account is not exempted from tax, and no tax is payable on it or in its returns, at the time of its withdrawal.

For 2008, the following rules, limits and contributions will be applicable on Roth IRA accounts.

1. WHO CAN MAKE CONTRIBUTIONS TO ROTH IRA

You can make contributions to a Roth IRA if your 'taxable compensation' and your 'Modified Adjusted Gross Income' or 'Modified AGI' is below the limits prescribed. The limit for Modified AGI for this purpose is $ $169,000 if married filing jointly or qualifying widow(er), $ 10,000 if married filing separately and you lived with your spouse at any time
during the year, and $ 116,000 for all others.

* Please note that these limits have been increased from $ 166,000 to $ 169,000 and $ 114,000 to $ 116,000 respectively for married filing jointly and separately.

2. WHAT IS MAXIMUM LIMIT OF CONTRIBUTION TO A ROTH IRA

A. If you are making contributions only to Roth IRA accounts (and no other IRA accounts) the limit for your contribution for 2008 will be lesser of $ 5000 or 'your taxable compensation for the year.'

B. If you are making contributions only to Roth IRA accounts and your age is 50 years or older before 2009, your contribution limit will lesser of $ 6000 or 'your taxable compensation for the year.'

*Please note that the limit has been increased from $ 4000 to $ 5000 nd from $ 5000 (for those over 50 years) to $ 6000, for the year 2008, thereby allowing you to contribute more to Roth IRAs.

If you are making contributions

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