A Roth IRA is an individual retirement plan in which an elligible individual can make contributions that are not tax deductible. The benefit of a Roth IRA is that qualified distributions are on a tax-free basis.
In order for a distribution to be qualified, it must fall under one of the following restrictions: It takes place 5 years or more after the taxpayer creates his/her first Roth IRA; the taxpayer becomes disabled; the taxpayer is 59 1/2 years of age or older; the taxpayer passes away; or the taxpayer is using the withdrawal to purchase his/her first home, in which case there is a limit of $10,000. The contributions that are made to the Roth IRA are invested in securities such as stocks. The contributor’s age, income, and tax filing status all determine how much he/she can deposit into the account.