There’s only two days left to file your taxes and only two days left to open up an individual retirement account.

One of the great tax saving benefits created by Congress over the past few years is the Roth IRA. One of the reasons Roth IRAs have become so popular with seniors and baby boomers is that they offer four distinct advantages over the conventional IRA.

First, your earnings in a Roth IRA account grow tax free forever. Next when it comes time to retire, you can withdraw cash tax free. You can withdraw the principal or the cash you’ve deposited into the account, tax free at any time. And if you’re a first time buyer, you can withdraw $10,000 penalty free and tax free to help purchase your first home.

There are a few limitations to a Roth IRA. First, you actually have to earn income at a job. You can’t count interest income from a bank account or CD. And you can’t put in more than you’ve earned. However, you can deposit up to $3,000 if you’re over the age of 50. And that’s per person, not per couple. The income limits are fairly generous as well. You can earn up to $95,000 if you’re single or up to $150,000 if you’re married before the Roth IRA benefit phases out.

Open up your Roth IRA at banks, financial investment companies or brokerage houses. Check out the fees that these companies charge to hold the Roth IRA accounts and the minimum deposit amounts.

What should you invest in? Remember that a Roth IRA is like a holding tank. If you don'[t actively choose an investment, it sits in a savings account earning 1 percent. Instead, choose cheap no-loan mutual funds or even cheaper index funds for your investment.

Finally, remember that putting money into a Roth IRA won’t lower this year’s tax bill. If you want to lower your tax bill, the only way to do it is with a conventional IRA, Keogh or money purchase pension plan. With a Roth IRA, you’ll use after tax cash, that’s the money left in your checking account, but unlike all of those other accounts, the cash will grow tax free forever.

To check out how various mutual funds have performed and their expense ratios, visit

For information about Roth IRAs, try these websites.

Copyright 2004, WGN-TV

April 13, 2004