Having a secure retirement plan, should be considered a top priority through every working individual. It is, however, somewhat difficult to choose among all the possible options because their requirements and features don’t say much to the interested person.

The process of choosing an individual retirement plan is generally guided next to the individual needs and investment style of the concerned individual. One possible option, a plan which tends to be fairly popular as retirement is concerned, is the so called Roth IRA account.

In other to be able to open such an account, a person needs to meet some significant requirements. First of all, as reasonable it may seem, the person must have an active employment status. Then, an institution needs to be selected that will have the responsibility to do the work for you.

Unlike traditional retirement plans, such as the 401(k) for example, the Roth IRA is the responsibility of the employee and the contributions made to that plan is not payroll deductible. In 2010, the amounts of contribution limits are kept at the levels that were applied in 2009. For 2010, the contribution limit stays at the quantity of is $5,000 for individuals who are under the age of 49. For people who are 50 and above, the contribution limit is $6,000 with a catch up quantity remaining at $1,000.

Since there’s income levels limits, individuals should know that if they are joint filers, they can only contribute the maximum quantity if their modified adjusted gross income is less than $167,000. The phase out limits for converting traditional IRAs into Roth IRAs for 2010 for joint filers are: between $167,000 and $177,000, as well as for individual filers between $105,000 and $120,000. Once retirement plan holders go above the phase out limits, they can no longer contribute to their Roth IRA.

Furthermore, the Roth IRA is a retirement savings plan that offers significant tax benefits. Basically, the tax benefit means that you don’t need to pay taxes on your contributions and earnings when you withdraw cash from the account. Normally, the cash in Roth IRA accounts are diversified and invested in various assets.

The earnings in the individual Roth IRA account accumulate until the person becomes 59 1/2 and can withdraw the earnings and contributions, but not the principal, without paying taxes. If the principal is withdrawn penalties apply. Unlike with traditional IRAs, the distributions with Roth IRAs are tax-free. Mind you, though, that they are tax-free up to the moment when you have withdrawn all your regular contributions.

The year 2010 is also the time when employees will have the right to convert old traditional IRAs and/or 401(k) retirement plans into Roth IRAs. Be aware that the conversion of nondeductible IRAs may bring about tax rules difficulties.

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