If your retirement savings took a hit over the last few years, you are not alone. With the plunge in the stock market many of us are facing the question of how to recover from the disaster, so we still have a chance of retiring some day. One of the best tools out there is still the Roth IRA.

The Roth IRA contribution limits have gone up over the years. Here is the maximum contribution allowed over the past four years based on your age as of the end of the year:

49 and younger                    50 and over

• 2007                $4000                                      $5000
• 2008                $5000                                      $6000
• 2009                $5000                                      $6000
• 2010                $5000                                      $6000

Keep in mind that these contribution limits are a combined limit with any Traditional IRA contribution you made. You can read the details at the IRS’s website. These limits are also reduced based on your adjusted gross income. For 2010 your AGI cannot be over $177,000 if you are married filing a joint return in order to contribute to a Roth IRA or $120,000 if you are single. If you have that kind of income, you can probably find other ways to recover your retirement nest egg.

As you can see in the table above, the Roth IRA contribution limits 2010 have not changed from the previous year. So what has changed in 2010?

2010 is the year you can convert your traditional IRA into a Roth IRA no matter what your income is. Previously, there has been an income cap to being allowed to convert from one type of account into another. Of course, just because you can, doesn’t mean that you should, but it may make sense for you.

If you are a high income earner and you keep bumping into the contribution limits, this may be your way to get around the Roth IRA income limits. For high income earners, a Roth IRA can be a great estate tool. Any income you earn in a Roth comes out tax-free. So if you want to create a fund for your children to inherit, this is a great tool.

The year 2010 is likely the year you want to make the switch in that case. Not only is it the first year you are eligible as a high income earner, this is the only year you will be able to split the tax burden in half by distributing it between 2010 and 2011. You are probably one of the lucky few that doesn’t have to worry about their retirement funds but this will give your kids a great start on theirs.

For the rest of us, bumping up what we save to the Roth IRA contribution limits will certainly help recover our strained retirement funds. After all, this is money that can earn money tax-free and be withdrawn without having to pay taxes on it when we need it in retirement.

Roth IRAs make the most sense for people with a long time horizon. If you think taxes will go down as you near retirement, it does not make sense to pay taxes now when you could be delaying that painful requirement. However, if you have enough time left in your working career to make that Roth IRA grow significantly, or if you are a master stock picker, you can’t beat earning money tax-free.

So maybe increasing your contributions to a Roth IRA won’t get rid of your retirement blues but it certainly could ease it. If you haven’t yet checked into the differences between a Roth IRA and a traditional IRA, check out this article at the Motley Fool’s website.