Roth IRA

• You can invest after-tax dollars in your IRA with a Roth IRA. When you open a Roth IRA, you do not get to deduct the amount you put in. But in the end you can get a much bigger tax break, since the money you take out of your Roth IRA in retirement is not subject to federal taxes. The possibility of tax-free withdrawals in retirement can be much more lucrative in the long run than an up-front tax deduction. This is particularly true for younger workers, who have decades to go before retirement. The money put into the Roth IRA can continue to grow and compound tax-free for decades, providing a pool of tax-free money those workers can tap when they do retire.
  
  

Contribution Limits

• The IRS does impose limits on the amount you can contribute to an IRA with after-tax dollars. For the tax year 2011, that limit is $5,000. In addition, the money you contribute to your IRA must be covered by your earnings. If you earn less than $5,000 in wages, the most you can contribute is the total of those yearly wages. You cannot contribute to an IRA using unearned income like dividends, capital gains or interest.
  
  

Catch-Up Contributions

• If you are at least 50 years of age or older, you can contribute an extra $1,000 to your after-tax Roth IRA. That means for 2011 you can contribute a total of $6,000 to the plan. You can contribute the money all at once in a lump sum, or you can make smaller contributions throughout the year. Either way, you have until April 15, or the tax filing deadline, to finish making all of your IRA contributions for the previous tax year.
  
  

Nondeductible IRA

• If you are over the income limits for contributing to a traditional deductible or a Roth iRA, you can still make a contribution to a nondeductible IRA. You do not get the tax advantages associated with a deductible IRA, but you can put aside after-tax dollars and have those dollars grow and compound until the day you retire. The nondeductible IRA can be a good choice for higher-income taxpayers who have seen their access to other IRA accounts diminish as their incomes rose.