You can start your plan with as low as $3000 and contribute $50 per month.  

Contribution limits

• In general, maximum Roth contributions are the same as traditional IRAs. The maximum annual contribution in 2008 is $5,000.
  If you were 50-years old or older last year, you could have contributed an extra $1,000. That catch-up contribution amount remains the same for 2008.
   
• However, you can't put more money than you make in any IRA. So if your income is only $1,500, then $1,500 is the most you can contribute to a Roth.
   
• For a Roth, your earned income (with some deductions you might have taken, such as for student loan interest, added back in), must be less than:
  • $166,000 if you're married filing jointly
  • $114,000 if you file as single, head of household, or married filing separately and did not live with your spouse during the year
  • $10,000 if you lived with your spouse at any time during the tax year but decide to file separately.

  And even if you're not quite at the top of these pay ranges, your Roth contribution could be limited if your MAGI (Modified Adjusted Gross Income) falls within these limits:

• As of January 1, 2008 the phase-out range increases to $159,000 - $169,000 for married couples filing jointly (if you are not covered by a retirement plan at work)

• $85,000 to $105,000 for married couples filing jointly (if you are covered by a retirement plan at work).

• $0 to $10,000 for married couples filing separately who lived together at any time during the tax year.

  You still can add to your Roth in these cases, but not the full allowable amount. Publication 590 contains work sheets and examples to help you determine your reduced Roth IRA contribution amount. A good reference is IRA Pub 590: http://www.irs.gov/pub/irs-pdf/p590.pdf

Roth IRA vs. Deductible IRA

The choice between saving in a Roth IRA and a deductible contribution to a traditional IRA is more difficult. The traditional IRA gives you a deduction when you contribute, but the Roth IRA gives you a chance to have earnings that are entirely tax-free for decades to come. Here are the main ideas here:

• If you're saving the maximum amount each year, the Roth IRA is likely to be better.
• If you're in a low tax bracket when saving, the Roth IRA is likely to be better.
• A Roth IRA grows tax free and qualified distributions are tax free. Non-qualified distributions may have taxes and/or penalties applied.
• Conversely, if you're in a high tax bracket when you contribute and expect to be in a much lower tax bracket when you withdraw your earnings, a traditional IRA may be the better choice, although the Roth IRA can still win if you keep the money in the account for a long time period.

Roth IRA vs. Employer Plan

If your employer provides a 401k or similar plan, you may face a choice between contributing to that plan or a Roth IRA. Don't forget you can do both!

• Choose your employer's 401k or similar plan if your employer will make matching contributions, and you don't expect to forfeit the matching contributions by quitting before they're vested.
• Otherwise choose as you would for a deductible IRA (see above). 

Roth IRA  has a tax structure unlike that of any other IRA:  

• Contributions are after-tax, but you won't pay any tax on your money when you eventually take it out, they are tax free.  It's more flexible: since you have already paid taxes up front, there are no minimum distribution requirements
• Since withdrawals are not reportable income, they won't affect your adjusted gross income during retirement
• May offer greater tax savings and withdrawal flexibility than a traditional IRA
• The Roth IRA provides earnings that are tax-deferred and possibly tax-free

• Your money will grow and after 5 years of compounding you can withdraw, tax-free*!

  * Just remember, if you withdraw before 59 1/2  you will pay a 10 % tax penalty. 

• Unlike the Traditional IRA, there are no limitations based on whether you are an active participant in an employer-sponsored plan. Also, contrary to a Traditional IRA, contributions may be made beyond age 70 1/2 provided you still have earned income. There is no age limit.

The Roth IRA also has one potential downside: You pay taxes while working rather than when retired.

 Can you Transfer/Rollover existing retirement accounts to Roth IRA?   Yes.

Since January 1 2008, 401k, 403b and other qualified plans can be directly rolled over into a Roth IRA. This event will be considered a Combined Rollover and Conversion (taxed as ordinary income at the current tax rate).

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