To Roth or not to Roth, that is the question — one on many people's minds. You've probably heard a lot of discussion on the Roth IRA, yet you're not quite sure if it's right for you. Basically, the Roth IRA provides a way to build assets and avoid income taxes on any earnings, which is what makes it so attractive to many Americans.

The Roth IRA differs from a Traditional IRA in that Roth contributions can only be made with after-tax money.

Like a Traditional IRA, you won't pay taxes on any earnings while they remain in your Roth IRA. The best news is that you also won't pay any taxes or penalties on the distributions as long as you hold the Roth IRA for at least five years and you're over 59 1/2 when you withdraw the money. You can even withdraw up to $10,000 for a first-time home purchase tax or penalty free, or for qualified higher education expenses penalty free provided your Roth IRA has been open for five years. If you need money before then, you can always take out your contributions tax free and penalty free. You will need to leave your earnings in the Roth IRA to avoid penalties and taxes.

Anyone with compensation that is under the maximum allowable can open a Roth IRA. You can make a full $5,000 contribution or $6,000 if 50 and over, if you are single and earn up to $105,000 (phasing out at $120,000), or are married and earn up to $166,000 (phasing out at $176,000). Even if you don't qualify for the full $5,000 contribution, you can still contribute the difference to a Traditional IRA. Unlike a Traditional IRA, you can continue making contributions as long as you have earnings, even beyond age 70 1/2. In addition, you are not required to take distributions at a certain age.

The list of penalty-free withdrawals has also been broadened to include higher education expenses, a first-time home purchase ($10,000 maximum) and payment of health insurance premiums if you are unemployed. These penalty-free withdrawals are also available from the Roth IRA.

So how do you decide which IRA is better for you? In general, you should make contributions to a Roth IRA each year unless you are sure that your income tax rate will be lower at retirement. The longer you can contribute to a Roth IRA and can take advantage of its tax-free distributions, the more likely you are to benefit from this attractive new option.

As with all tax decisions you should consult with your accountant or attorney to see which IRA option is best for you. Make sure that you take full advantage of the enhanced IRA options available for you to save today, so you can enjoy your retirement tomorrow.