This new IRA is getting a lot of publicity. Contributions to a Roth IRA are not tax deductible. However, withdrawals from a Roth IRA may be tax-free.

Married couples filing a joint tax return with MAGI up to $150,000 and single filers with MAGI up to $95,000 can make full contributions to a Roth IRA. Those with higher incomes may qualify for reduced contributions. Contributions can be made to a traditional IRA, a Roth IRA, or both for a given year, but the total contributed cannot exceed your annual compensation or $2,000 per year, whichever is less.

QUALIFYING FOR TAX-FREE WITHDRAWALS

Withdrawals from a Roth IRA are tax and penalty free as long as the account has been open for at least five tax years and you are either over age 59 1/2, disabled, or buying a first home.

You may withdraw tax and penalty free the contributions you have made to the account at any time. But when you withdraw the earnings without meeting the above requirements, they are subject to income tax and may be subject to a 10% penalty tax.

TRANSFERS FROM A TRADITIONAL IRA TO A ROTH IRA

You can transfer your traditional IRA funds to a Roth IRA, provided MAGI from your federal tax form is no more than $100,000 in the year you transfer it.

The money you transfer to a Roth IRA from a traditional IRA is subject to income tax in the year that it is transferred except when the withdrawal is a return on nondeductible contributions. The 10% penalty tax does not apply. If your contributions were not tax deductible at the time you made them, then only the earnings on the account are subject to income tax when you transfer them. Taxable income resulting from the transfer of money from a traditional IRA to a Roth IRA is ignored when determining whether your MAGI for the year is less than $100,000.

If you transfer funds from your traditional IRA during 1998, then the taxable income created by the transfer is spread evenly over four tax years - 1998 through 2001. After December 31, 1998, this special tax treatment is no longer available and the entire taxable amount of your distribution is subject to income tax in the year you receive it.

If you're unsure whether a Roth IRA is right for you, check with your tax advisor.