Roth IRAs are one of the most powerful retirement planning tools available. Most people, however, aren’t taking full advantage of the opportunity. Converting traditional IRAs to Roth IRAs is only the tip of the iceberg. I’ve devoted a lot of attention to the conversion decision since 2009, and those discussions are available to Retirement Watch members on the members’ web site. Yet, there are other ways to use this powerful tool to enhance your lifetime security and financial independence.

The advantages of the Roth IRA are well-known. Gains and income compound tax-free within the IRA. When it’s time to take distributions, they are tax-free most of the time. Also, you don’t have to take required minimum IRA distributions after age 70½, though beneficiaries who inherit Roth IRAs are required to take minimum distributions.

The cost of using a Roth IRA is you don’t receive the upfront tax break of a deduction for contributions. When you convert a traditional IRA to a Roth, you include in gross income the amount converted. In either case, you’re investing after-tax money.

Compounding income and gains tax-free and then receiving lifetime tax-free income are substantial benefits. Too many people are foregoing this opportunity to build a tax-free foundation for their futures because they don’t receive the upfront tax benefit and don’t know all the ways to take advantage of the Roth IRA opportunity. Let’s reconsider those decisions.

Those of you who are working no doubt are having salary deferred into a 401(k) or similar plan. You also are, or should be, saving additional money from your after-tax income to build your nest egg. There are several ways you could manage that extra savings.

You could hold the savings in a taxable account. This doesn’t provide any current tax benefits. It also provides some long-term tax breaks. You could invest primarily in tax-advantaged ways. For example, you could own appreciating assets that don’t pay income and hold them for more than a year, hopefully substantially longer than a year. Then, when you sell them you’ll be taxed at the long-term capital gains rate, currently at a maximum 20%. You also might invest in tax-free bonds, master limited partnerships, stocks that pay qualified dividends, or some other tax-advantaged vehicles. Some advisors recommend putting some of that money in tax-deferred annuities or cash-value life insurance policies.

An alternative is to put some of that money in a Roth IRA. There’s no deduction, but your money is in a tax-free vehicle. You can contribute up to $5,500 to a Roth IRA in 2013, and an additional $1,000 if you are age 50 or over. Why not put that amount in the Roth IRA and capture that lifetime tax-free status instead of leaving it in a taxable account?

Not everyone can contribute to a Roth IRA, because the right to make a contribution is phased out as income rises. For single taxpayers, the contribution is phased out when adjusted gross income is between $112,000 and $127,000. For married couples filing jointly the phase out is for AGIs between $178,000 and $188,000.

The Roth IRA option isn’t foreclosed when your income is in or above those levels.

You can contribute to a traditional IRA. There’s no income limit on who can contribute to a traditional IRA, but there are limits on who can deduct the contributions. Deductions are phased out for a single taxpayer whose AGI is between $59,000 and $69,000 in 2013 and for married taxpayers filing jointly between $95,000 and $115,000. The contribution limit (not the deduction limit) is the same as for the Roth IRA.

Here’s what you can do. Make the contribution to a traditional IRA. Then, convert that amount to a Roth IRA. You won’t have to include in gross income any amount that wasn’t deductible when contributed to the traditional IRA, and any deduction you’re allowed on the contribution should offset any amount that’s included in gross income on the conversion. So, by taking an extra step you can put money into a Roth IRA each year.

Keep in mind you can contribute to an IRA, whether traditional or Roth, only to the extent you have earned income for the year. If you aren’t working, you can’t make a contribution.

You also can use a Roth IRA to benefit your children or grandchildren if you’re inclined to make gifts to them. Instead of giving money or property outright, you can contribute to a Roth IRA in the individual’s name to the extent he or she has earned income. For example, if a grandchild has a summer job and earned $3,000, you can put $3,000 into a Roth IRA for the grandchild. The grandchild can do whatever he or she wants with the money earned from the job. Putting the money in a Roth makes it more likely that it will be saved and accumulated for the future instead of being spent.

Some people discourage the use of Roth IRAs, because there’s a possibility Congress might change the rules and make them fully or partially taxable in the future. It is possible. But you likely wouldn’t be any worse off than if you hadn’t opened the Roth IRA. Plus, a lot of other tax advantages also could be eliminated or reduced in the future, and many other changes are likely to occur before Roth IRAs are taxed.

Because of the potential for changing laws and circumstances, I encourage people to have tax diversification, just as their investment portfolios should be diversified. None of us can forecast accurately what the tax law will look like in the future. You shouldn’t bet on one tax outcome. Instead, have your money spread among the different tax vehicles: taxable accounts, 401(k)s, traditional IRAs, Roth IRAs, and perhaps annuities. That way, you have flexibility, can benefit from a range of future tax laws, and won’t be burned by any possible tax outcome.