For 2010, a person who is under 50 years of age is allowed to contribute up to $5000 in a Roth IRA. A person who is 50 or older may contribute up to $6000.
However, one's modified adjusted gross income (MAGI) can limit the contribution -- in essence, if your income is too high, you can only contribute a smaller amount, or none at all. These limitations start to kick in at $105,000 MAGI for individual filers and $167,000 MAGI for married filing jointly.
The huge benefit to the Roth IRA is that it grows tax-free, and that you can take money from it (most often, having reached age 59 1/2, or using it for certain first-time home buying expenses) tax-free. There are very few investment vehicles that allow such tax benefits.
And, regarding estate planning issues, you can designate a beneficiary for your Roth IRA. The beneficiary designation allows for instant transfer upon death; the Roth is free from probate -- the lengthy, costly, yet often necessary process of wealth transfer upon death.
The money in a Roth is often invested in the stock market. Let's assume a modest 5% growth each year and do the math:
Contributions starting at age 30 and ending at age 60 = 30 years of contribution. (If you are older than 30, don't let this throw you; just start ASAP. You'll still see incredible results.)
Let's also assume you contribute $5000 each year, although the maximum rate is adjusted upward every few years -- so you might be putting even more money in as the years pass.
This means that you will have, over 30 years, contributed $150,000 to the Roth.
Compounding by that modest 5%, you will, by age 60, have $347,000. Congratulations, you have more than doubled your money -- and you get all of it, with no obligations to the IRS!
You can open an IRA online -- just go to the Fidelity, the Vanguard, the Wells Fargo websites and take a look.
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