Even though the Roth IRA has been around for almost 10 years, I still get a lot of questions about how it works. Today, I'll review the 10 Roth questions I hear most frequently, with the hope of helping you better understand this valuable IRA option.

Q. Can my 16-year-old make a Roth IRA contribution?

A. Age is not a determining factor. As long as your child has earned income with which to open the Roth IRA account, and as long as he or she falls under the adjusted-gross-income limitations, then he or she can make an IRA contribution regardless of age. The key is having earned income, such as from working a job. See more on this point a few questions down.

Q. Can my 73-year-old parent convert a regular IRA to a Roth IRA?

A. Again, age is not a determining factor. If your parent's AGI is less than the $100,000 limitation, then your parent is eligible to make the conversion. And the good news is that under recently passed legislation, any required minimum distributions that your parent must take will not count against the $100,000 AGI limitation.

Q. I'm retired and drawing Social Security. Can I contribute part of my Social Security benefits to a Roth IRA account?

A. Nope. Sorry. To make a Roth IRA contribution, you must have earned income. Earned income is generally income you receive from working -- as compensation for your labor in one form or another. It's reported to you on a W-2 form, or you report it on Schedule C (Business Income) or Schedule F (Farm Income) with your normal tax return. Earned income generally does not include Social Security benefits, pensions, interest, dividends, rental income, or capital gains. It can, however, include alimony.

Q. I want to contribute to my Roth IRA, but my custodian says I can't put annual contributions into an account that has been converted. Is this true? And if so, what should I do?

A. There's no legal reason for you to separate your contribution and conversion funds into separate accounts. Under the old Roth IRA rules, contributions and conversions had different five-tax-year start times, depending on conversion and/or contribution dates. Because of these staggered start times, the IRS suggested that contributions and conversions be maintained in separate Roth IRA accounts. That suggestion was made to the various financial institutions, and the institutions passed that information on to their clients.

But with the changes to the Roth IRA rules with the Tax Reform Act of 1998, the need for these separate accounts has been negated. It is now acceptable to commingle your Roth IRA conversions and contributions. While there are still staggered start times for contributions versus conversions, the rules surrounding those start times are much clearer. So having conversions and contributions in the same account, while still tricky, isn't impossible to deal with.

If your broker still insists that you separate your conversion funds and contribution funds, make sure to tell him or her of the new law that removed the segregation restrictions. And if that doesn't work, consider finding a new broker.

Q. I converted my regular IRA to a Roth IRA back in January. I've just discovered that my adjusted gross income will exceed the $100,000 conversion limitation this year. What should I do?

A. You can "recharacterize" your converted Roth IRA back to a traditional IRA without any penalty or tax. You just need to do it before Oct. 15 of the following year. That's right -- the following year. If you made your conversion in January of 2006, the recharacterization wouldn't have to take place until Oct. 15, 2007. You're also required to "un-convert" not only your original conversion amount, but also any of the earnings generated by that original conversion.

So, just because you go over the AGI limitation, that doesn't mean all is lost. Your broker should be able to help you with the recharacterization back to a regular IRA account.

Q. I intend to retire at 50. When I do, I'll need income. Can I take money from my Roth IRA without paying any taxes or penalties?

A. Potentially, yes. Under the IRS ordering rules, you are allowed to remove your original contributions at any time without tax or penalty. In addition, after you've waited at least five tax years, you're able to withdraw your original converted amounts without taxes or penalties. It's only when you get to the earnings generated by the original contributions and conversions that you will have a tax and/or penalty problem.

Even if you do determine that you'll have to break into the earnings before you reach age 59 1/2, you may still be able to avoid the penalty -- but not necessarily the tax. If you remove the funds from your Roth IRA account using a distribution method that is part of a scheduled series of substantially equal periodic payments made over your life expectancy (and the life expectancy of your beneficiary), you may still be penalty-free.

Q. When I convert my regular IRA to a Roth IRA, do I have to pay the taxes all at once?

A. Yes. You're required to report the entire conversion income in the year of conversion. For conversions occurring in 1998, the income could have been spread out over several years, but that option is no longer available.

Q. If I convert my IRA to a Roth IRA, will that income increase my adjusted gross income for the current year?

A. Absolutely. The income you have to report for an IRA conversion to a Roth IRA will have an impact on all tax issues that are based on AGI -- except for any direct Roth contribution and/or conversion issues. In other words, if you meet the AGI limitation rules to convert or contribute to a Roth before taking the conversion income into consideration, this income won't make you ineligible based on an increased AGI. But any tax provisions that use AGI as a guidepost will be affected -- including medical expenses (7.5% AGI floor), miscellaneous deductions (2% AGI floor), taxability of Social Security (based on AGI), passive loss limitations (based on AGI), and many others.

In some cases, your AGI may be severely affected. This must be taken into consideration when you decide to make a Roth IRA conversion.

Q. If I have a large tax balance due next April because of my Roth IRA conversion, will I be able to avoid the underpayment penalties related to estimated taxes?

A. No. You can't be exempted from the underpayment penalty just because the balance due was caused by a Roth IRA conversion. There are other exceptions to the underpayment penalty that you might want to review, since they may allow you to dodge the penalty, but there is no "safe harbor" simply because the underpayment was caused by a Roth IRA conversion.

Q. I've heard from a friend that the AGI limitation for a Roth IRA is $100,000. I've heard from other friends that the actual AGI limitation is much higher. Which is it?

A. It depends on whether you're talking about a "conversion" or a "contribution."

If you're talking about converting your regular IRA to a Roth IRA, then the AGI limitation is $100,000 for all filing categories, except for married folks filing separately. They're effectively prohibited from making a conversion regardless of their AGI, unless the couple is separated and has lived apart for the entire tax year.

But, if you're talking about making a contribution to a Roth IRA, then the rules are a bit different. The AGI limitations depend on your filing status. If you're single and your modified AGI less than $110,000 (or married with modified AGI of less than $160,000) you'll be eligible for at least a partial Roth IRA contribution.

The Roth IRA is a powerful investment tool. Make sure that you don't overlook how a Roth IRA could round out your investment portfolio.

Fool contributor Roy Lewis lives in a trailer down by the river and is a motivational speaker when not dealing with tax issues, and he understands that The Motley Fool is all about investors writing for investors. You can take a look at the stocks he owns, as long as you promise not to ask him which stock to buy. He'll be glad to help you compute your gain or loss when you finally sell a stock, though.