Should you and your spouse plunk as much as $10,000 of your annual income ($12,000 if both you and your spouse are age 50 or older) in to a Roth IRA? Here are eight factors to consider:

1. Roth contributions are best for those who expect the same or higher tax rates in retirement.

That's because qualified Roth withdrawals are federal-income-tax-free (and usually state-income-tax-free too). In general, you can take qualified withdrawals after reaching age 59 as long as you've had at least one Roth account open for over five years. Because you can withdraw accumulated Roth earnings tax-free during retirement, you avoid having to pay high tax rates in those years.

The downside is that you get no upfront deduction for a Roth contribution. So if you expect to pay lower tax rates during retirement, you might be better off making a deductible traditional IRA contribution (assuming your income permits), because the current deduction may be worth more to you than tax-free withdrawals later on. (For more on the income restrictions and contribution limits for the different types of IRAs, read through our IRA Primer

You're also an ideal Roth IRA candidate if your income is simply too high to make deductible traditional IRA contributions.

2. Contributions are limited and earned income is required.

The absolute maximum amount you can contribute for any tax year to a Roth IRA is the lesser of: (1) your earned income for that year or (2) the annual contribution limit for that year.

Basically, earned income means wage and salary income (including bonuses), alimony received (believe it or not), and self-employment income.

For 2011 and 2012, the annual Roth contribution limit is $5,000 or $6,000 if you're age 50 or older as of year-end. This assumes you're unaffected by the high-income phase-out rule explained later. (You must reduce your annual Roth contribution limit by any amount contributed to a traditional IRA for the year.)

3. You and your spouse can combine incomes, but contribute independently.

If you're a married joint-filer, both you and your spouse can probably make Roth contributions to your own separate accounts. For purposes of the aforementioned earned income limitation, you can add your earned income to that of your spouse.

For example, say your joint earned income is $100,000, but none of that was earned by your spouse. No problem. You can make a $5,000 Roth contribution (or $6,000 if you're age 50 or older), and so can your spouse. This is allowed because your combined earned income ($100,000) exceeds your combined Roth contributions ($12,000 at most).

4. Roth contributions are phased out for higher-income folks.

For 2011, eligibility to make annual Roth contributions is phased out for unmarried individuals with modified adjusted gross income (MAGI) of $101,000 to $116,000. This is also the case for married, living separately.

For married joint filers, the 2011 phase-out range is joint MAGI of $159,000 to $169,000.

For 2011, the phase-out range if you use married filing separate status is between MAGI of $0 and $10,000. (Sorry about that.)

To calculate MAGI, start with the adjusted gross income number on the last line on page 1 of Form 1040. Then add back any: (1) deductible traditional IRA contributions, (2) deduction for higher-education tuition and fees, (3) deduction for student loan interest, (4) tax-free adoption assistance payments from your employer, (5) tax-free interest from U.S. savings bonds redeemed to pay higher-education costs, (6) deduction for domestic production activities, and (7) certain tax-free foreign earned income and housing allowances. (The last four add-backs are not very common and probably don't apply to you.)

5. It's rarely too late to make contributions.

The Roth contribution deadline for the 2011 tax year is April 17, 2012. You can make a contribution for the 2012 tax year anytime between January 1, 2012 and April 15, 2013. The sooner you contribute, the sooner you can start earning tax-free income.

6. If you're age 70 or older, you can still make annual Roth contributions

After age 70 , you can still make Roth IRA contributions -- as long as you (and/or your spouse if you're married) have earned income at least equal to what you contribute. In contrast, contributions to traditional IRAs are off limits after age 70 .

7. Participation in retirement plans doesn't affect Roth eligibility

Eligibility to make annual Roth contributions is unaffected by your participation (or your spouse's participation if you're married) in an employer-sponsored retirement plan, such as a 401(k) or 403(b). In contrast, an income phase-out rule restricts your right to make deductible traditional IRA contributions if you or your spouse participate such a retirement plan. (Again, our IRA Primer

8. Tax Return considerations

There's nothing to report on your Form 1040 when you make an annual Roth contribution. You should still keep track of your pay-ins, though. If you ever need to take nonqualifying withdrawals in the future, you can withdraw up to the total amount of your annual contributions without any tax or penalty.