As the cost of living continues to increase at a faster pace than the average person's income, the ability to live the lifestyle to which we've become accustomed after retirement is a significant concern. Considering the fact that life expectancy is also increasing as medical technology improves, it is possible to live 20 or more years of your life after retirement. To this end, ensuring that there will be enough of an income to support your lifestyle is perhaps the most important aspect of retirement planning altogether.

When combined with the fact that the future of our country's tax laws is uncertain, it would make sense to take advantage of the opportunity to arrange for income-tax-free benefits during your retirement years. The Roth IRA is a retirement vehicle whose features are designed to address this issue, and should seriously be considered by anyone who could benefit from tax-free income in their later years.

The Roth IRA is an Individual Retirement Account that is funded with after-tax dollars, meaning that no current-year income tax deduction is available for contributions. In exchange for paying the taxes now on a portion of your income that you earmark for retirement, rather than deferring the payment of those income taxes until you actually use the money, the government has agreed not to require you to pay taxes on the growth of your investments in that account.

The true power of the Roth IRA is its tax-free growth. You're going to pay income taxes on your contributions to both the traditional IRA and the Roth IRA, the only difference being whether or not you pay those taxes now or later. The question to consider then is do you also want to pay income taxes on the growth of your investment?

When considering the Roth IRA, it's necessary to determine if a tax deduction for this year's contributions would put you into a lower tax bracket, and how much of a savings would be realized from that deduction. Would the potential savings on this year's tax bill exceed the total savings from tax-free growth of your long-term investment? The answer is almost always no.

Because there is significant potential and power in the ability to receive income without paying taxes, the government has placed restrictions on who is eligible to participate in the Roth IRA, and also on how much money may be contributed to these accounts. For 2007, the maximum annual contribution limit is $4,000 per person, with a "catch-up" contribution amount of an additional $1,000 for anyone over 50-years-old. These contribution limits are scheduled to slowly increase as the years go by in order to keep pace with increases in inflation and the overall cost of living. Anyone who is a single tax filer with an Adjusted Gross Income (AGI) over $114,000 is not eligible to contribute to the Roth IRA, nor are joint filers with an AGI over $166,000.

Opening a Roth IRA is an extremely simple process that can be handled by any number of financial institutions. The type of investment vehicle that is most appropriate for your long-term retirement planning goals will help determine where an account should be established. The most appropriate way to address the situation is to seek the assistance of an independent financial planner, a person who can provide access to multiple investment choices and companies.