An individual retirement account (IRA) that was introduced in 1998 and provides an alternative to a traditional IRA. With a Roth IRA, deductions can only be made with after-tax money. However, earnings are not taxed when the distribution is taken at 59⁄ years of age after holding the account for at least 5 years.

Money for certain eligible expenses can be withdrawn before age 59⁄ without paying tax or penalties, provided that the account has been active for five years. Those expenses include higher education, $10,000 for a first-time home purchase, and payment of health insurance for unemployed people.

A contribution of $3,000 a year can be made for a single person who earns up to $95,000, with ineligibility starting to occur at $110,000. Married couples can contribute $6,000 if they earn up to $150,000, with eligibility phasing out at $160,000.